TIDMBBA
RNS Number : 3156G
BBA Aviation PLC
01 March 2018
BBA Aviation plc
2017 Final Results
Results for the year ended
31 December 2017
For further information please contact:
David Crook, Group Finance Director (020) 7514 3999
Kate Moy, Head of Investor Relations & Communications
BBA AVIATION PLC
David Allchurch (020) 7353 4200
TULCHAN COMMUNICATIONS
A video with BBA Aviation management is now available on
www.bbaaviation.com and www.cantos.com
A live audio webcast of the analyst presentation will be
available from 08:15 today on www.bbaaviation.com and
www.cantos.com
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2017
Underlying results(1) Statutory results
2017 2016 Change 2017 2016 Change(2)
Continuing
Group
Revenue 2,370.6 2,149.1 10% 2,370.6 2,149.1 10%
EBITDA 447.9 384.5 16% 418.7 346.6 21%
Operating
profit 360.6 302.6 19% 237.6 166.1 43%
Profit / (loss)
before tax 298.5 238.7 25% 175.5 (82.2) -
Profit / (loss)
after tax 246.3 199.2 24% 141.8 (19.3) -
Basic earnings
per share 24.0c 19.4c 24% 13.8c (1.9)c -
Total Group
Return on
invested capital 11.0% 10.1% 90 bps
Free cash
flow - - 220.6 224.1 (2)%
Net debt (1,167.1) (1,335.3) (168.2)
Net debt to
adjusted underlying
EBITDA 2.6x 3.2x (0.6)x
Dividend per
share 13.40c 12.75c 5%
1. Refer to alternative performance measures for the note
outlining all adjusted and continuing measures
2. % change based on continuing operations for operating
performance
Highlights
-- Strong overall Group performance, underlying continuing
operating profit up 19% to $360.6 million
-- Statutory profit before tax for 2017 was $175.5 million
compared to a loss of $82.2 million in 2016
-- Adjusted continuing underlying basic EPS up 24% to 24.0
cents. Unadjusted continuing basic EPS of 13.8 cents against a loss
of 1.9 cents in 2016
-- Final dividend up 5.2% reflecting continued confidence in the
Group's future growth prospects.
-- Business performance:
o Flight Support (83% of Group underlying OP)
-- Signature organic revenue growth of 3.8% was in line with the
US B&GA market growth of 3.7%
-- In the second half, Signature organic revenue growth moved
ahead of the market at 4.4% against the US B&GA market which
grew at 4.1%
-- Organic underlying operating profit growth of 11.3%,
significantly ahead of the growth in the underlying B&GA
markets
o Aftermarket Services (17% of Group underlying OP)
-- Organic underlying operating profit growth of 32.2%
-- Ontic - delivered an excellent operating performance with
strong contributions from new licences and organic growth from
legacy US military licences
-- ERO - much improved operating margin performance despite
organic revenue decline
-- We are currently conducting a strategic review of our ERO
business
-- Exceptional and other items of $127.0 million is largely
non-cash and associated with the amortisation of acquired
intangibles $93.8 million and restructuring costs of $28.0 million
primarily on assets at our ERO facility in Abu Dhabi, which is
scheduled to close over the next few months, and the final phase of
our ERO footprint rationalisation.
-- Free cash flow from continuing operations was $254.0 million.
On a statutory basis, free cash flow was $220.6 million (2016:
$224.1 million) and as a result the Group de-levered to 2.6x net
debt to underlying EBITDA on a covenant basis.
-- New target leverage range of 2.5x to 3.0x net debt to
underlying EBITDA on a covenant basis will maintain an efficient
balance sheet and reflects the strong and robust cash generative
characteristics of the business whilst also providing the
flexibility required to meet the investment opportunities of the
business to fund organic and inorganic growth.
Wayne Edmunds, BBA Aviation Interim Chief Executive Officer,
commented:
"2017 was another successful year for BBA Aviation. It was a
year when we continued to lay the foundations for further growth
and value creation across our Signature network of 198 FBOs. Over
the year we have successfully negotiated revised commercial terms
for over 50% of our revenue and these started to positively impact
in our second half and contributed to our market outperformance
during that period.
The US B&GA market has grown strongly during the year. We
have invested in the network through lease extensions, adding
hangar space, growing our line maintenance offering through
Signature TECHNICAir(TM) and expanding our Signature Elite(R) and
Signature Select(R) offerings, all of which extend and enhance our
opportunity for continued market outperformance. We see potential,
as we look forward, to expand our offering of non-fuel services and
further leverage our market leading network.
I am pleased with the much-improved financial performance from
our Aftermarket Services business. We have made further investments
in Ontic's IP protected licence portfolio and the licences acquired
from GE Aviation at the end of 2016 have made a strong initial
contribution. Ontic continues to see significant growth
opportunities and has a strong pipeline of opportunities to add to
the licence portfolio and a good order book. The second half also
saw a much-improved operating performance from ERO supported by the
benefits from the footprint rationalisation program.
We have undertaken a comprehensive review of our capital
structure and increased our targeted leverage range, maintaining a
capital efficient balance sheet based on the strong and robust cash
flow fundamentals of the Group.
Furthermore, I am delighted that Mark Johnstone, who has
extensive experience across the Group will take up his appointment
as Chief Executive Officer at the beginning of April.
In summary, the Group is focused on higher value-added, better
IP protected, high ROIC and strongly cash generative businesses
with encouraging prospects and the Board remains confident of good
growth in 2018 with a good pipeline of further investment
opportunities."
FINAL RESULTS 2017
Overview
BBA Aviation has delivered another year of strong growth. Our
underlying operating profit outperformed strong B&GA markets in
2017.
During the year we made significant progress on transitioning
our customers onto new commercial agreements to begin capturing the
value from the unique Signature network, post the integration of
Landmark Aviation. Ontic's focus as a high quality, cash generative
market leading provider of legacy support services was further
enhanced with the addition of new licence agreements during the
year. Furthermore, the acquisition of GE Aviation's portfolio of
legacy avionics products in December 2016 made an encouraging
initial contribution.
Flight Support delivered excellent underlying operating profit
growth, continuing to outperform its markets, with good drop
through to profit. In Aftermarket Services, Ontic, our Legacy
Support business, delivered ahead of our expectations. We saw a
good contribution from licences added in 2016 and organic growth
from military parts programmes, including the B52. ERO delivered a
much-improved operating performance through market share gains on
certain engine platforms, underpinned by ongoing cost reduction and
the results of the footprint rationalisation. This was achieved
despite markets that remained challenging with no recovery in
legacy mid-cabin fixed wing flying and continued pressure on
pricing and workscopes.
Continuing Group revenue increased by 10% to $2,370.6 million
(2016: $2,149.1 million), including $92.7 million contribution from
acquisitions. Flight Support revenue increased 13.8%, reflecting
the contribution from acquisitions of $53.0 million, being one
additional month of Landmark Aviation and the additional three
months of contribution from the new FBOs in Italy, together with
the impact of higher fuel prices, partially offset by foreign
exchange movements, that increased Flight Support revenue by $88.1
million. Aftermarket Services revenue was up 3.1% driven by Ontic
offsetting the decline from continuing challenging markets in
ERO.
Continuing underlying Group operating profit was up 19% to
$360.6 million (2016: $302.6 million). There was an excellent
performance in Flight Support which increased operating profit as
adjusted for FX and disposals by $43.8 million and includes a $11.6
million contribution from acquisitions. Aftermarket Services, now
17% of continuing Group underlying operating profit, was up $24.6
million as adjusted for FX due to Ontic's strong performance and
included a $11.5 million contribution from acquisitions and a
much-improved financial performance at ERO.
Statutory Group operating profit was up 43% to $237.6 million
(2016: $166.1 million) due to improved trading performance and
lower exceptional and other items, as set out below.
Continuing Group underlying operating profit margin increased to
15.2% (2016: 14.1%) reflecting underlying margin growth in both
Flight Support and Aftermarket Services. On a constant fuel,
disposals adjusted basis the underlying operating margin increased
200 basis points to 15.2%.
Underlying net interest decreased by $1.8 million to $62.1
million (2016: $63.9 million). Net debt decreased to $1,167.1
million (2016: $1,335.3 million). On a covenant basis, the net debt
to underlying EBITDA ratio decreased to 2.6x (2016: 3.1x), and on a
reported basis to 2.6x (2016: 3.2x). Interest cover on a covenant
basis increased to 8.4x (2016: 7.2x), due to the decreased interest
on the lower drawn debt.
Underlying continuing profit before tax increased to $298.5
million (2016: $238.7 million).
The Group's underlying effective tax rate for continuing
operations is 17.5% (2016: 16.5%). Underlying profit after tax
increased by 24% and continuing underlying adjusted earnings per
share (EPS) increased by 24% to 24.0 cents (underlying adjusted
2016: 19.4 cents). Cash EPS, the measure of EPS adjusted to use a
current as opposed to total tax charge, increased 29% to 28.6 cents
(2016: 22.1 cents).
Total Group ROIC increased 90bps to 11.0%, up from 10.1% in
2016.
Exceptional and other items after tax, for continuing and
discontinued operations, totalled $127.0 million (2016: $316.0
million). Significant items include restructuring expenses of $28.0
million (2016: $9.9 million), comprising of $15.7 million as a
result of restructuring ERO's Abu Dhabi facility and $12.3 million
associated with ERO's footprint rationalisation programme and
actions taken to address the costs previously associated with
supporting ASIG; $93.8 million of non-cash amortisation of acquired
intangible assets (2016: $98.6 million), and $22.5 million loss
after tax on disposal of discontinued operations (2016: $97.5
million). The impact of the enactment of the Tax Cuts and Jobs Act
in the US has also been presented as exceptional and other item tax
charge as set out below.
Continuing statutory profit before tax was $175.5 million versus
an $82.2 million loss for the prior year.
Free cash flow was $220.6 million (2016: $224.1 million), the
decrease mainly due to a working capital outflow of $46.3 million
compared to an inflow of $36.1 million in the prior year and
increased tax payments, largely offset by increased earnings, lower
capital expenditure and lower interest payments.
Gross capital expenditure amounted to $80.3 million (2016:
$102.4 million). Principal capital expenditure items include the
investment in our FBOs at Boeing Field, Palm Beach and Nashville,
our new engine overhaul and testing facility at Dallas Fort Worth
and our Ontic facility in Cheltenham to support the ongoing
transition of GE Aviation avionics licenses.
Working capital outflows in the year of $46.3 million (2016:
$36.1 inflow), represented $25.7 million outflow relating to
discontinued operations and approximately $20 million outflow
representing the expected reversal of outperformance from 2016.
Cash flows on exceptional and other items during the year were
$12.7 million (2016: $63.5 million) which primarily relate to
restructuring costs.
The Group's tax payments during the year were $41.8 million
(2016: $15.8 million) which included tax payments of $8.4 million
in relation to the disposal of ASIG. Net interest payments were
$57.2 million (2016: $61.8 million) and dividend payments amounted
to $130.7 million (2016: $124.3 million).
The consideration paid relating to acquisitions during the year,
including deferred consideration, was $75.7 million, net of cash
acquired. This related substantially to the acquisition of Ontic's
licences. In December 2016, Ontic completed the acquisition of a
portfolio of legacy avionics products from GE Aviation for $60.7
million. The cash payment for this acquisition was made in January
2017.
Business Review - Continuing Operations
Flight Support (83% of underlying operating profit)
Our Flight Support division provides specialist on-airport
services including refuelling, ground handling and hangarage to the
business & general aviation (B&GA) market through Signature
Flight Support, line maintenance services through Signature
TECHNICAir(TM) and aircraft management and charter operations
through its affiliate Gama Aviation Signature Aircraft
Management.
$m 2017 2016 Change
Revenue 1,643.0 1,443.2 13.8%
Organic revenue
growth 3.8% 3.9% (10)bps
Underlying operating
profit 329.4 294.0 12.0%
Underlying operating
margin 20.0% 20.4% (40)bps
Underlying operating 20.0% 18.6% 140bps
margin (adjusted
for fuel and disposals) 247.1 177.3 39.4%
Operating profit
Operating cash flow 313.4 276.8 13.2%
Divisional return
on invested capital 12.2% 11.2% 100bps
Revenue in Flight Support increased by 13.8% to $1,643.0 million
(2016: $1,443.2 million), reflecting a net positive impact of
higher fuel prices and foreign exchange movements and $53.0 million
contribution from 2016 acquisitions being an additional one month
contribution from Landmark Aviation and an additional three months
contribution from the acquisition of four FBOs in Italy. Flight
Support's organic revenue growth of 3.8% for the full year
reflected good growth in the US B&GA market generally with
movements up 3.7% and European B&GA movements up 7.3% during
the year.
Underlying operating profit in Flight Support increased by 12.0%
to $329.4 million (2016: $294.0 million), driven by continued
strong underlying operational performance in Signature Flight
Support and an $11.6 million contribution from acquisitions.
Underlying operating profit includes our Signature TECHNICAir(TM)
and our aircraft management and charter business which is accounted
for as a joint venture. On an organic basis, adjusting for
acquisitions ($11.6 million), FX ($0.6 million) and disposals ($7.8
million), underlying operating profit increased by 11.3%.
Underlying operating margins were slightly lower due to the
increase in fuel prices and disposal of FBOs in 2016 which were
equity accounted. Underlying operating margins adjusted for
constant fuel prices and disposals increased by 140 basis points to
20.0%.
Statutory operating profit of $247.1 million increased by 39.4%
(2016: $177.3 million). This is a result of strong organic growth
plus the impact of acquisitions, net of disposals and a reduction
in exceptional and other items, primarily lower amortisation of
acquired intangible assets and the non-repeat of acquisition
integration costs from 2016. Operating cash flow for the division
was $313.4 million (2016: $276.8 million) due principally to strong
organic operating profit growth and reduced capital expenditure.
Return on invested capital increased to 12.2% (2016: 11.2%)
reflecting the strong improvement in underlying operating profit
during the year.
Signature Flight Support's locations delivered another strong
performance in a good growth environment, as we started to capture
the benefits of our strong and customer-relevant network.
Against a background of a US B&GA market that grew 3.1% in
the first half, Signature performed broadly in line with the market
despite a short term negative impact on fuel volumes while
negotiations with Signature's customers were undertaken and the
loss of the Santa Ana FBO in April 2017. In the second half,
Signature outperformed its principal US B&GA market with 4.4%
organic revenue growth against the market which grew at 4.1%
reflecting both the positive customer response to the enlarged
network proposition and the good progress with our commercial
renegotiations.
The hurricanes in August and September: Harvey, Irma and Maria
caused minimal impact overall across the Signature network and we
were able to re-establish services quickly and provide support for
the rescue and relief efforts. Damage to our FBO network was
limited although there were some excess payments made on our
insurance policies by Signature. The further impact of hurricane
insurance claims is covered under central costs below.
Signature is well positioned to focus on optimising its unique
and high quality global network of FBOs and line maintenance
locations, through the provision of a broader range of B&GA
services to our extensive customer base and enhancing network
performance to accelerate value creation. The unique Signature
network has the unmatched ability to satisfy the needs of our
customers at many more locations that they want to fly to,
supporting anticipated continued outperformance in 2018 and
beyond.
In 2017 Signature expanded its affiliate FBO programme,
Signature Select(R) . It signed an extended licence agreement with
Fly Across at Toluca International Airport in Mexico, just a
30-minute drive from Santa Fe, the country's financial and business
district. This location increases the Signature Select(R) network
to 19 locations globally and we continue to look for further
opportunities to expand this proposition.
Signature has continued to invest in its current network, with
the successful opening of its newly constructed FBO, with premium
hangar space to satisfy the growing tenant demand, at Boeing Field,
Seattle which completed in June 2017. It also secured a new
strategic lease at Washington Dulles International Airport.
BBA Aviation has also recently taken a minority investment in
Victor, a leading on-demand private jet charter company. Through
this minority investment which concurrently acquired RocketRoute, a
global flight planning and trip support business, we are committed
to being at the forefront of advances in data and technology
enabled customer service. As the demographic using and chartering
private jets continues to change, our ability to utilise technology
will ensure we bring the best possible service to our many
discerning customers.
There are now 198 locations in Signature's global network.
Aftermarket Services (17% of underlying operating profit of
continuing operations)
Our Aftermarket Services division is focused on the support of
maturing aerospace platforms through Ontic, our legacy support
business and the repair and overhaul of engines through our ERO
businesses.
$m 2017 2016 Change
Revenue 727.6 705.9 3.1%
Organic revenue
growth (1.7)% (10)% -
Underlying operating
profit 65.3 42.0 55.5%
Underlying operating
margin 9.0% 5.9% 310bps
Operating profit 33.6 22.2 51.4%
Operating cash
flow 66.0 34.0 94.1%
Divisional ROIC 11.3% 6.9% 440bps
In Aftermarket Services, revenue grew by 3.1% to $727.6 million
(2016: $705.9 million). Underlying operating profit of $65.3
million (2016: $42.0 million) was driven by Ontic which now
represents c.85% of the division's profits, supported by a
much-improved performance in ERO. Underlying operating margins grew
strongly during the year to 9.0% (2016: 5.9%).
On an organic basis, adjusting for FX ($1.3 million) and
acquisitions ($11.5 million) the Aftermarket Services underlying
operating profit was up 32.2% driven primarily by a recovery in ERO
through cost-reduction actions and supported by organic growth in
Ontic on military licences.
Operating profit of $33.6 million has increased (2016: $22.2
million) as a result of improved organic operating performance in
Ontic and ERO and the contribution from acquisitions in Ontic.
Operating cash flow for the division was $66.0 million (2016:
$34.0 million) which reflected the improved operating performance,
lower capital expenditure and the receipt of proceeds from the sale
of the Forest Park facility in Dallas. Return on invested capital
increased to 11.3% (2016: 6.9%) reflecting the improved operating
performance.
Ontic
Ontic, our legacy support business, continues to perform well,
with revenue up 26.9% to $208.8 million (2016: $164.5 million). On
an organic basis, revenue was up 4.5%.
The 2017 performance includes a significant contribution from
the portfolio of legacy avionics products acquired from GE Aviation
in December 2016. This business has been substantially transitioned
into Ontic's existing UK facility in Cheltenham over the course of
2017. The cash payment of $60.7 million for this acquisition was
made in January 2017. Furthermore, it was a strong year for
cyclical military demand - B52 actuation and C130 Radar units
shipped in significant quantities during 2017 which we do not
expect to repeat in 2018. We expect the non-repeat element of the
cyclical military orders to counter growth from new licences
acquired at the end of 2017.
Ontic has further extended its licensed product portfolio during
the year with the addition of important new licences; Ontic has
recently signed a second product licence with Ultra Electronics for
the OE manufacturing and aftermarket support for various military
cockpit controls, switches and indicators. We also have a new
licence agreement with UTC Aerospace Systems for its wound motor
product lines, part of the electric power systems business segment.
This adds significant military content to our portfolio.
In December 2017, we acquired Curtiss-Wright's product line for
the Ethernet Switch Unit, which grows not only our military
platform content but also our product portfolio with
Curtiss-Wright. Furthermore, Ontic has received certification by
the US Department of Transportation Federal Aviation Administration
for its Singapore facility which serves as both a repair station
and storefront for a variety of OEM-licenced and acquired products,
including fuel measurement systems on the Boeing B737 Classic and
B777, Fokker 50,70 and 100 as well as the Airbus A300, A318, A319
and A320. In 2018, we have also signed a first product licence with
Racal Acoustics, part of Esterline Corporation, for various
military and civil avionics products including cockpit
communication control systems. The products will transition to our
Cheltenham facility during 2018.
These acquisitions support Ontic's strategy to deliver continued
profitable growth in mature avionics and electronics products with
high intellectual property content. Ontic continues to assess a
strong pipeline of opportunities in relation to new products and
licence adoptions.
ERO
Engine Repair & Overhaul's revenue decreased by 4.2% to
$518.8 million (2016: $541.4 million). Conditions in ERO's market
remain challenging and, while organic revenue was down for the
year, we have improved our market share on the majority of
programmes. ERO's operating performance in the first half was
stable against the second half of 2016 but much improved on the
first half of 2016. Operating performance in the second half
delivered significant improvement in line with expectations
resulting from market share gains (PT6, TFE, PW300 and Tay) and
cost efficiencies from the footprint rationalisation programme.
Volumes in legacy mid-cabin and rotorcraft engine overhauls
remained depressed throughout the year, with reduced workscopes and
competitive market pricing. In the first half of the year ERO saw
improvements in demand for overhauls in certain Pratt & Whitney
and Tay markets, as well as market share gains for certain Pratt
& Whitney engines. However, while our market share has improved
on the majority of programmes, we continue to see lower engine
inputs, primarily on JT15D, PW500 and PW100. Time between engine
overhauls continues to extend and the increase of power by the hour
contracts either through the OEMs or third parties increases the
competitive tension.
ERO's footprint rationalisation programme is nearly complete and
it will undergo its final facility consolidation in 2018. The new
overhaul facility at Dallas Fort Worth Centre (DFW) is successfully
delivering the overhaul operations formerly undertaken at the
Neosho and Forest Park facilities. The sale of the Forest Park site
for $17.4m completed at the end of 2017. Looking forward the
combination of an efficient, lower cost, flexible engine overhaul
and test facility in DFW and a renewed focus on customer service
will drive further improvement in financial performance and allow
us to execute our strategy for value creation from our ERO
business.
We have recently made the decision to close our engine overhaul
operations in Abu Dhabi given insufficient market demand to support
our facility on current engine authorisations. We expect the
facility to complete its final engine overhaul in April.
As part of BBA Aviation's focus on driving long term sustainable
value for our shareholders, we are currently conducting a strategic
review of our ERO business although there is no certainty that this
will result in a transaction being agreed.
Central Costs
Central costs were $0.7 million higher at $34.1 million (2016:
$33.4 million). The central cost base represents two elements, the
unallocated corporate costs for the Group and the costs previously
associated with supporting the ASIG business, which was sold in
January 2017. We supported Menzies (the acquirer of ASIG) for a
period of six months through to July 2017 and since July we have
been able to address the cost base that had supported the
transitionary service agreement with Menzies. The work to address
the cost base that previously supported ASIG is substantially
complete with approximately $5 million of such costs included in
the central costs for 2017 (2016: $18.6 million). These costs will
not impact the group from 2018 onwards.
The balance of central costs represents the unallocated central
costs to support the continuing Group which reflects the additional
share based payment expenses as anticipated, plus the one-time
costs associated with the transition of CEO and losses incurred by
our captive insurance company for the damage to US and Caribbean
facilities during the recent hurricanes.
Other Financial Information and Leverage
At 31 December 2017 the Group had net debt of $1,167.1 million
(2016 net debt: $1,335.3 million), the decrease being due to the
strong operating performance of the business and the net proceeds
from the disposal of ASIG while continuing to invest in the
existing businesses and new Ontic licenses.
Net cash flow from operating activities of $339.0 million is
lower than the prior year (2016: $374.9 million) primarily as a
result of the outflow in working capital compared to the inflow in
the prior year and the disposal of ASIG in January 2017. Free cash
flow decreased by $3.5 million to $220.6 million (2016: $224.1
million) as a result of the working capital movements as previously
noted and increased tax payments largely offset by increased
earnings, decreased capital expenditure and interest payments.
Capital expenditure amounted to $80.3 million (2016: $102.4
million). Principal items included the investment in our FBOs at
Boeing Field, Palm Beach and Nashville, our new engine overhaul and
testing facility at Dallas Fort Worth and our Ontic facility in
Cheltenham to support the ongoing transition of GE Aviation
avionics licences.
Other significant cash flow items include the proceeds from
disposal of ASIG $170.5 million, net of fees, the acquisition of
subsidiaries, net of cash acquired $75.7 million (2016: $2,098.2
million) and dividend payments of $130.7 million (2016: $124.3
million). The Group's net debt to underlying EBITDA ratio at 31
December 2017 was 2.6x on a reported basis (2016 3.2x reported
basis) and 2.6x on a covenant basis (2016: 3.1x on a covenant
basis), well within our target range. Interest cover on a covenant
basis increased to 8.4x (2016: 7.2x), due to the decreased interest
on the lower drawn debt.
Strategy and capital allocation policy
Post the $2.1bn acquisition of Landmark Aviation and the
disposal of ASIG the Group is increasingly focused on the B&GA
markets; and we communicated at our preliminary results
announcement in March 2017 that we would undertake a review of
capital structure during the year. The review is now complete and
we believe an increase in our target leverage range is appropriate
based on the strong and robust cash flow fundamentals of the
Group.
However, the Group remains disciplined in its approach to the
allocation of capital with the overriding objective being to
enhance shareholder value. Our investment priorities remain focused
on achieving organic underlying operating profit growth above that
in the B&GA market and continued development of our IP
protected legacy licence portfolio. Within Signature we see
investment opportunities through investments in technology, hangar
construction to address market shortages in certain areas of the
US, expansion of our Signature TechnicAir(TM) offering, build out
of our Signature ELITE(R) offering at major international airports
and investing in bolt-on acquisitions that build upon our
leadership in the B&GA market. Within Ontic we see a strong
pipeline of opportunities as OEMs seek to manage their legacy IP
and believe there may be the potential for acquisitions within
Ontic's core markets that provide portfolios of licences in
addition to the acquisition of individual licences from OEMs.
Our capital allocation policy will firstly focus on the many
organic investment opportunities we see across both Flight Support
and Aftermarket Services. This will be supplemented by bolt-on
acquisition opportunities in Flight Support, extension of our IP
protected licence portfolio in Ontic through individual licence
opportunities provided by the OEMs and the potential acquisition of
complementary licence portfolios. To the extent that BBA Aviation's
investment pipeline results in leverage falling below the target
range we will return funds to shareholders at a level that
maintains leverage at the lower end of the target range, thereby
maintaining the flexibility to execute our strategy to continue to
maximise shareholder value.
Our balance sheet remains strong and the Group will now manage
net debt in the range of 2.5x to 3.0x underlying adjusted EBITDA
which we believe gives flexibility and headroom for the investment
requirements of the Group and the cyclicality within the B&GA
market. The Group has performed within this target range during
2017 following the disposal of ASIG with net debt to underlying
adjusted EBITDA at 31 December 2017 being 2.6x, in line with
expectations. The new target range provides up to 1.0x headroom
against the group's net debt to adjusted underlying EBITDA banking
covenant.
The Board continues to have a progressive dividend policy which
aims to align the core dividend with sustainable long-term earnings
growth.
The group will now proceed to refinance its revolving credit
facility and facility B of its acquisition debt, both of which
mature in 2019. In 2018 the group has $120 million of series A US
private placement debt maturing. This debt will be repaid and the
group will leave the remaining $380 million of US private placement
debt (maturities ranging from 2021 to 2026) in place.
Taxation
The Group's underlying effective tax rate for 2017 was 17.5%.
This is lower than the expected 19% given the impacts of UK
legislation on interest deductions and further concentration of US
taxable profits were partially offset by prior year adjustments on
US taxes with respect to Landmark.
The impact of the enactment of the Tax Cuts and Jobs Act in the
US is broadly neutral for the Group's underlying effective tax rate
in 2018. As a result of US tax reform legislation, the Group has
incurred a one-time, exceptional tax charge in 2017 of $20.5
million, primarily related to the non-cash revision of US deferred
tax assets and liabilities. The group has revalued US deferred tax
liabilities at 31 December 2017, primarily relating to amortisation
of intangibles to reflect the reduction in headline US tax rates
and written off US deferred tax assets primarily relating to
deferred interest as a result of the tax reform restrictions on
interest deductibility which is now capped at 30% of US EBITDA. In
addition, the exceptional tax charge includes a $3.0 million
one-time repatriation tax charge on the unremitted earnings of
overseas subsidiaries controlled by a US entity. This one-time tax
charge is payable over eight years and has minimal impact on the
group's cash tax rate.
The group's cash tax payments for 2017 amounted to $41.8 million
(2016: $15.8 million). The increase in cash tax payments resulted
from the increased taxable profits of the group and certain
one-time payments including settlement of tax payable ($8.4
million) on the taxable gain arising from the disposal of ASIG's US
operations.
For the year ending 31 December 2018, we estimate the group's
effective tax rate to be approximately 20%. The Group's cash tax
rate is expected to remain substantially lower than the underlying
effective tax rate by c.10% which reflects the benefit of 100%
capital deductions available for the next five years as part of US
tax reform.
Pensions
The Group paid net $8.4 million of pension payments during the
period, of which $4.0 million represented pension deficit payments
reflecting the agreed payments to the schemes.
The actuarial valuation of the UK plan at 31 March 2015
indicated a funding deficit of GBP45 million ($66 million) at 31
March 2015 exchange rates. The Group paid GBP4.3 million of pension
payments in to the UK plan, of which GBP3.0 million represented
pension deficit payments, reflecting the agreed payments to the
scheme under an agreement to make additional contributions of
GBP0.3 million per annum over the next three years bringing the
annual deficit contribution to GBP3.0 million, and GBP2.7 million
thereafter until 2034 in accordance with the asset-backed funding
arrangement established in 2014.
As at 31 December 2017, the accounting net deficit across the UK
and US plans was $71.7 million (2016: $82.8 million). The reduction
in the net deficit of $11.1m since 31 December 2016 reflects the
favourable impact of better than expected returns on plan assets
and employer contributions, more than offsetting unfavourable
impacts from foreign exchange movements, net interest costs and
administration expenses. In 2017 the largest of the US plans
undertook an exercise during the year whereby lump sum transfer
payments were paid out to a number of members in order to discharge
the associated liabilities. This resulted in a deficit reduction
for that particular plan of $2.1 million.
Dividend
At the time of the interim results, the Board declared an
increased interim dividend of 3.81 cents (H1 2016: 3.63 cents). The
Board is now proposing a final dividend of 9.59 cents per share
(2016: 9.12 cents) up 5.2% on an underlying basis 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.
Board Changes
As previously announced Mark Johnstone, currently President and
Chief Operating Officer of the Group's Engine Repair & Overhaul
business will join the Board as Group Chief Executive on 1 April
2018. He will be based in the US. Mark joined BBA Aviation in March
2008 as Corporate Development Director and has held a number of
roles within the Group including Chief Financial Officer Signature
Flight Support and Managing Director of the EMEA Flight Support
business (at that time incorporating both Signature and ASIG).
After 1 April 2018 Wayne Edmunds will remain on the Board. He
will be a non-executive Director and will not be a member of any
main Board Committees.
Furthermore, we have recently appointed two new non-executive
directors. Amee Chande and Emma Gilthorpe both joined the Board on
1 January 2018. Amee brings significant international experience
living and working in North America and Asia and currently works
for Alibaba as Managing Director of Global Strategy and Operations.
Emma has extensive aviation experience from her various roles at
Heathrow Airport Holdings (formerly BAA) and is currently Executive
Director for Expansion. We also announced that Peter Ratcliffe will
step down from the Board at our AGM on 11 May 2018.
Outlook
2017 was another successful year for BBA Aviation. We have
delivered improved financial performance across the Group, started
to capture the value from the enlarged network and ensured we have
an appropriate capital structure to give us the flexibility to
continue to invest in the many organic and inorganic growth
opportunities available to us and enhance shareholder value.
The recent investment in our Signature network, through lease
enhancements, adding hangar space and the development of our
Signature TECHNICAir (TM) brand are all focused on delivering
continued market outperformance in terms of our earnings growth. We
will continue to look to expand our FBO network through both
acquisition and our Signature Select (TM) franchise model to ensure
we remain the market leader with unmatched customer and network
relevance, protected by our long-term lease portfolio. Where
possible, we will use technology to analyse our customer's flying
patterns and predict needs and trends and offer our customer base
accessibility to the charter market through digital platforms. We
saw B&GA market growth moderate during December and this has
continued into the first two months of the new financial year.
Our growing portfolio of IP protected licences and
authorisations within Ontic, offers significant opportunities and
the business has a strong pipeline and a good order book.
Furthermore, we anticipate ERO should deliver further improved
financial performance from its rationalised footprint even at
current levels of market activity.
In summary, the Board remains confident of good growth in
2018.
Capital Markets Day
BBA Aviation intends to hold a Capital Markets Day in Q4 2018.
Further information will be released in due course.
Going Concern
The Directors have carried out a review of the Group's trading
outlook and borrowing facilities, with due regard to the risks and
uncertainties to which the Group is exposed, the uncertain economic
climate and the impact that this could have on trading performance.
Based on this review, the Directors believe that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the financial
statements have been prepared on a going concern basis.
Directors' Responsibilities
The responsibility statement below has been prepared in
connection with the Company's full Annual Report for the year
ending 31 December 2017. Certain parts of the Annual Report are not
included within this announcement.
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with
Disclosure and Transparency Rules of the UK Financial Conduct
Authority and principles of International Financial Reporting
Standards (IFRS) as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the management report, which is incorporated into the
Directors' Report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties they face.
Signed on behalf of the Board
Wayne Edmunds David Crook
Interim Group Chief Executive Group Finance Director
28 February 2018 28 February 2018
This final results announcement contains forward-looking
statements including, without limitation, statements relating to:
future demand and markets of the Group's products and services;
research and development relating to new products and services;
liquidity and capital; and implementation of restructuring plans
and efficiencies. These forward-looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Accordingly,
actual results may differ materially from those set out in the
forward-looking statements as a result of a variety of factors
including, without limitation: changes in interest and exchange
rates, commodity prices and other economic conditions; negotiations
with customers relating to renewal of contracts and future volumes
and prices; events affecting international security, including
global health issues and terrorism; changes in regulatory
environment; and the outcome of litigation. The Company undertakes
no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
This report is available in electronic format from the Company's
website www.bbaaviation.com
Consolidated Income Statement
2017 2016
======================== ====== ========================================= =========================================
Exceptional Exceptional
and and
other other
Underlying(1) items Total Underlying(1) items Total
For the year ended
31 December Notes $m $m $m $m $m $m
======================== ====== ============== ============ =========== ============== ============ ===========
Continuing operations
Revenue 1 2,370.6 - 2,370.6 2,149.1 - 2,149.1
Cost of sales (1,813.1) - (1,813.1) (1,654.7) - (1,654.7)
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
Gross profit 557.5 - 557.5 494.4 - 494.4
Distribution costs (36.1) - (36.1) (37.6) - (37.6)
Administrative
expenses (171.8) (93.8) (265.6) (172.3) (98.6) (270.9)
Other operating
income 8.9 - 8.9 5.7 - 5.7
Share of profit
of associates and
joint ventures 3.4 - 3.4 13.4 - 13.4
Other operating
expenses (1.3) (1.2) (2.5) (1.0) (28.0) (29.0)
Restructuring costs 2 - (28.0) (28.0) - (9.9) (9.9)
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
Operating profit/(loss) 1, 2 360.6 (123.0) 237.6 302.6 (136.5) 166.1
Impairment of assets 6 - - - - (184.4) (184.4)
Investment income 3.2 - 3.2 3.7 - 3.7
Finance costs (65.3) - (65.3) (67.6) - (67.6)
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) before
tax 298.5 (123.0) 175.5 238.7 (320.9) (82.2)
Tax (charge)/credit 3 (52.2) 18.5 (33.7) (39.5) 102.4 62.9
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) from
continuing operations 246.3 (104.5) 141.8 199.2 (218.5) (19.3)
Discontinued operation
(Loss)/profit from
discontinued
operation,
net of tax 10 - (22.5) (22.5) 17.9 (97.5) (79.6)
Profit/(loss) for
the period 246.3 (127.0) 119.3 217.1 (316.0) (98.9)
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
Attributable to:
Equity holders
of BBA Aviation
plc 246.4 (127.0) 119.4 217.1 (316.0) (98.9)
Non-controlling
interest (0.1) - (0.1) - - -
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
246.3 (127.0) 119.3 217.1 (316.0) (98.9)
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
Earnings/(loss)
per share Adjusted Unadjusted Adjusted Unadjusted
======================== ====== ============== ============ =========== ============== ============ ===========
Total Group
11.6
Basic 5 24.0c c 21.1c (9.6)c
23.7 11.5
Diluted 5 c c 20.9c (9.6)c
Continuing operations
24.0 13.8
Basic 5 c c 19.4c (1.9)c
23.7 13.7
Diluted 5 c c 19.2c (1.9)c
Discontinued operations
(2.2)
Basic 10 - c 1.7c (7.7)c
(2.2)
Diluted 10 - c 1.7c (7.7)c
------------------------ ------ -------------- ------------ ----------- -------------- ------------ -----------
1 Underlying profit is before exceptional and other items.
Exceptional and other items are defined in note 2
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
The Group has presented a discontinued operation in the current
year and prior year, see note 10.
Consolidated Statement of Comprehensive Income
2017 2016
For the year ended 31 December Notes $m $m
======================================= ====== ====== =======
Profit/(loss) for the period 119.3 (98.9)
Other comprehensive income/(loss)
Items that will not be reclassified
subsequently to profit or loss
Actuarial gains/(losses) on defined
benefit pension schemes 11.2 (52.3)
Tax (charge)/credit relating
to components of other comprehensive
income/(loss) that will not be
reclassified subsequently to
profit or loss 3 (1.1) 9.8
--------------------------------------- ------ ------ -------
10.1 (42.5)
--------------------------------------- ------ ------ -------
Items that may be reclassified
subsequently to profit or loss
Exchange difference on translation
of foreign operations (6.8) 1.0
Recycling of translational exchange
differences accumulated in equity 10 6.4 -
Fair value movements in available
for sale investments (4.4) (2.0)
Fair value movements in foreign
exchange cash flow hedges 10.1 1.3
Transfer to profit or loss from
other comprehensive income on
foreign exchange cash flow hedges (2.2) (4.5)
Fair value movement in interest
rate cash flow hedges 1.7 (5.4)
Transfer to profit or loss from
other comprehensive income on
interest rate cash flow hedges 4.0 7.3
Tax relating to components of
other comprehensive income that
may be subsequently reclassified
to profit or loss 3 (4.3) 2.8
--------------------------------------- ------ ------ -------
4.5 0.5
Other comprehensive income/(loss)
for the year 14.6 (42.0)
Total comprehensive income for
the year 133.9 (140.9)
--------------------------------------- ------ ------ -------
Attributable to:
Equity holders of BBA Aviation
plc 134.0 (141.1)
Non-controlling interests (0.1) 0.2
--------------------------------------- ------ ------ -------
133.9 (140.9)
--------------------------------------- ------ ------ -------
Consolidated Balance Sheet
2017 2016
As at 31 December Notes $m $m
============================================== ====== ========= =========
Non-current assets
Goodwill 6 1,126.6 1,113.9
Other intangible assets 6 1,311.3 1,378.3
Property, plant and equipment 845.5 875.6
Interests in associates and joint ventures 41.4 40.1
Trade and other receivables 20.1 19.2
Deferred tax asset 0.1 0.4
---------------------------------------------- ------ --------- ---------
3,345.0 3,427.5
---------------------------------------------- ------ --------- ---------
Current assets
Inventories 249.9 235.8
Trade and other receivables 321.4 296.8
Cash and cash equivalents 153.5 182.5
Tax recoverable 0.7 1.4
Assets held for sale 10 - 267.7
---------------------------------------------- ------ --------- ---------
725.5 984.2
---------------------------------------------- ------ --------- ---------
Total assets 1 4,070.5 4,411.7
---------------------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables (502.1) (543.2)
Tax liabilities (31.9) (36.8)
Obligations under finance leases (0.2) (0.2)
Borrowings 7 (124.2) (1.0)
Provisions (32.2) (27.6)
Liabilities held for sale 10 - (89.3)
---------------------------------------------- ------ --------- ---------
(690.6) (698.1)
---------------------------------------------- ------ --------- ---------
Net current assets 34.9 286.1
---------------------------------------------- ------ --------- ---------
Non-current liabilities
Borrowings 7 (1,198.6) (1,546.7)
Trade and other payables due after one year (0.9) (4.0)
Pensions and other post-retirement benefits (71.7) (82.8)
Deferred tax liabilities (137.8) (120.5)
Obligations under finance leases (1.1) (1.5)
Provisions (36.6) (39.5)
---------------------------------------------- ------ --------- ---------
(1,446.7) (1,795.0)
---------------------------------------------- ------ --------- ---------
Total liabilities 1 (2,137.3) (2,493.1)
---------------------------------------------- ------ --------- ---------
Net assets 1,933.2 1,918.6
---------------------------------------------- ------ --------- ---------
Equity
Share capital 509.0 508.7
Share premium account 1.594.5 1,594.5
Other reserve (5.4) (1.0)
Treasury reserve (92.8) (91.0)
Capital reserve 50.4 45.1
Hedging and translation reserves (73.9) (87.1)
Retained earnings (50.1) (52.2)
---------------------------------------------- ------ --------- ---------
Equity attributable to equity holders of BBA
Aviation plc 1,931.7 1,917.0
---------------------------------------------- ------ --------- ---------
Non-controlling interest 1.5 1.6
---------------------------------------------- ------ --------- ---------
Total equity 1,933.2 1,918.6
---------------------------------------------- ------ --------- ---------
These financial statements were approved by the Board of
Directors on 28 February 2018 and signed on its behalf by:
Wayne Edmunds David Crook
Interim Group Chief Executive Group Finance Director
Consolidated Cash Flow Statement
2017 2016
For the year ended 31 December Notes $m $m
======================================== ====== ========= =========
Operating activities
Net cash flow from operating
activities 8 339.0 374.9
Investing activities
Interest received 3.3 2.7
Dividends received from associates 2.4 2.4
Purchase of property, plant
and equipment (73.4) (101.6)
Purchase of intangible assets (11.9) (11.4)
Proceeds from disposal of property,
plant and equipment 16.8 11.1
Acquisition of subsidiaries
net of cash/(debt) acquired 9 (75.7) (2,098.2)
Investment in joint venture (0.3) -
Proceeds from disposal of subsidiaries
and associates, net of costs 170.5 186.6
---------------------------------------- ------ --------- ---------
Net cash inflow/(outflow) from
investing activities 31.7 (2,008.4)
---------------------------------------- ------ --------- ---------
Financing activities
Interest paid (60.5) (64.5)
Interest element of finance
leases paid (0.1) (0.1)
Dividends paid 4 (130.7) (124.3)
Gains from realised foreign
exchange contracts (15.0) 42.7
Proceeds from issue of ordinary
shares net of issue costs 0.3 0.3
Sale/(purchase) of own shares 0.3 (1.3)
(Decrease)/increase in loans (222.6) 1,035.3
(Decrease)/increase in finance
leases (0.4) 1.7
Increase/(decrease) in overdrafts 3.0 (11.0)
---------------------------------------- ------ --------- ---------
Net cash (outflow)/inflow from
financing activities (425.7) 878.8
---------------------------------------- ------ --------- ---------
(Decrease)/increase in cash
and cash equivalents (55.0) (754.7)
Cash and cash equivalents at
beginning of year 205.3 966.4
Exchange adjustments 3.2 (6.4)
---------------------------------------- ------ --------- ---------
Cash and cash equivalents at
end of year 153.5 205.3
---------------------------------------- ------ --------- ---------
Comprised of:
Cash and cash equivalents at
end of the year 153.5 182.5
Cash included in Assets held
for sale at end of the year 10 - 22.8
Net debt at beginning of year (1,335.3) 456.5
Decrease in cash and cash equivalents (55.0) (754.7)
Decrease/ (increase) in loans 222.6 (1,035.3)
Decrease/ (increase) in finance
leases 0.4 (1.7)
(Increase)/decrease in overdrafts (3.0) 11.0
Exchange adjustments 3.2 (11.1)
---------------------------------------- ------ --------- ---------
Net debt at end of year (1,167.1) (1,335.3)
---------------------------------------- ------ --------- ---------
Purchase of intangible assets includes $5.0 million (2016: $10.6
million) paid in relation to Ontic licences not accounted for as
acquisitions under IFRS 3.
Sale/(purchase) of shares includes the share purchases for the
share buy-back scheme, shares purchased for the Employee Benefit
Trust and shares purchased for employees to settle their tax
liabilities as part of the share schemes.
Within the Group's definition of net debt, the US private
placement is included at its face value of $500 million (2016: $500
million), reflecting the fact that the liabilities will be in place
until maturity. This is $3.5 million (2016: $8.8 million) lower
than its carrying value.
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
Consolidated Statement of Changes in Equity
Share Share Retained Other Non-controlling Total
capital premium earnings reserves Total interests equity
Notes $m $m $m $m $m $m $m
=========================== ====== ========= ========= ========== ========== ======= ================ ========
Balance at 1
January 2016 508.5 1,594.4 208.2 (137.9) 2,173.2 (4.8) 2,168.4
Loss for the
year - - (98.9) - (98.9) - (98.9)
Other comprehensive
loss for the
year - - (39.7) (2.1) (41.8) (0.2) (42.0)
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Total comprehensive
loss for the
year - - (138.6) (2.1) (140.7) (0.2) (140.9)
Dividends - - (124.3) - (124.3) - (124.3)
Issue of share
capital 0.2 0.1 - 0.3 - 0.3
Movement on
treasury reserve - - - (1.3) (1.3) - (1.3)
Credit to equity
for equity-settled
share-based
payments - - - 9.1 9.1 - 9.1
Changes in non-controlling
interest - - - - - 6.6 6.6
Tax on share-based
payment transactions 3 - - 0.7 - 0.7 - 0.7
Transfer to
retained earnings - - 1.8 (1.8) - - -
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 31
December 2016 508.7 1,594.5 (52.2) (134.0) 1,917.0 1.6 1,918.6
Profit for the
year - - 119.4 - 119.4 (0.1) 119.3
Other comprehensive
income for the
year - - 5.8 8.8 14.6 - 14.6
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Total comprehensive
income/(loss)
for the year - - 125.2 8.8 134.0 (0.1) 133.9
Dividends - - (130.7) - (130.7) - (130.7)
Issue of share
capital 0.3 - - - 0.3 - 0.3
Movement on
treasury reserve - - - 0.3 0.3 - 0.3
Credit to equity
for equity-settled
share-based
payments - - - 10.0 10.0 - 10.0
Tax on share-based
payment transactions 3 - - 0.8 - 0.8 - 0.8
Transfer to
retained earnings - - 6.8 (6.8) - - -
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 31
December 2017 509.0 1,594.5 (50.1) (121.7) 1,931.7 1.5 1,933.2
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Accounting Policies of the Group
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) adopted for use
in the European Union (EU) and therefore comply with Article 4 of
the EU International Accounting Standards (IAS) Regulation and the
Companies Act 2006 applicable to companies reporting under
IFRS.
The financial information for the year ended 31 December 2017
contained in this preliminary announcement was approved by a duly
appointed and authorised committee of the Board of Directors on 28
February 2018. The announcement does not constitute statutory
accounts of the Company within the meaning of section 435 of the
Companies Act 2006, but is derived from those accounts.
Statutory accounts for the year ended 31 December 2016 have been
delivered to the Registrar of Companies. Statutory accounts for the
year ended 31 December 2017 will be delivered to the Registrar of
Companies following the Company's Annual General meeting.
The Group's annual financial statements for the year ended 31
December 2017 have been reported upon by the Group's auditor. The
report of the auditor was unqualified, did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and did not contain a
statement under section 498(2) or 498(3) of the Companies Act
2006.
Except as described below, these consolidated financial
statements have been prepared in accordance with the accounting
policies, presentation and methods of calculation as set out in the
Group's consolidated financial statements for the year ended 31
December 2017.
New financial reporting requirements
A number of EU-endorsed amendments to existing standards and
interpretations are effective for annual periods beginning on or
after 1 January 2018 and have been applied in preparing the
Consolidated Financial Statements of the Group. There is no impact
on the Group Consolidated Financial Statements from applying these
standards.
Financial reporting standards applicable for future financial
periods
A number of EU-endorsed standards and amendments to existing
standards and interpretations, are effective for future annual
periods and have not been applied in preparing the Consolidated
Financial Statements of the Group.
The most significant changes to the IFRS framework in these
forthcoming standards and amendments to standards are IFRS 9:
Financial Instruments (IFRS 9), IFRS 15: Revenue from contracts
with customers (IFRS 15) and IFRS 16: Leases (IFRS 16).
IFRS 9
The Group will apply IFRS 9 from 1 January 2018. IFRS 9
addresses the classification, measurement and recognition of
financials assets and financials liabilities, impairment and hedge
accounting.
Classification and measurement: The number of categories of
financial assets under IFRS 9 has been reduced compared to IAS 39.
The classification is based on the business model within which the
asset is held and the contractual cash flow characteristics of the
assets.
For financial assets that are debt instruments the
classification categories are amortised cost; fair value through
other comprehensive income (FVTOCI) and fair value through profit
or loss (FVTPL). Equity investments that fall within the scope of
the standard are usually measured at FVTPL unless an irrevocable
election is made to recognise them within other comprehensive
income. On transition the Group has elected to recognise future
changes in the fair value of the equity investment in Fly Victor
Limited and Lider Taxi Aereo S.A Air Brasil which are classified as
financial instruments within other comprehensive income.
Impairment: The impairment model under IFRS 9 reflects expected
credit losses, as opposed to only incurred credit losses under IAS
39.
Hedge accounting: On initial application of the standard, an
entity may choose, as its accounting policy, to continue to apply
the hedge accounting requirements of IAS 39 instead of the hedge
accounting requirements of IFRS 9. The Group will adopt the hedge
accounting requirements of IFRS 9 from 1 January 2018.
The full impact of adopting IFRS 9 on the Consolidated Financial
Statements of the Group will depend on the financial instruments
that the Group has during 2018 as well as on economic conditions
and judgements made as at the year end. The Group has performed a
preliminary assessment of the potential impact of adopting IFRS 9
based on the financial instruments and hedging relationships as at
the date of initial application of IFRS 9 (1 January 2018).
Management's expectations are that the impact of IFRS 9 on the
Group will not be material.
IFRS 15
IFRS 15 addresses the recognition of revenue from customer
contracts and impacts on the amounts and timing of the recognition
of such revenue. IFRS 15 will supersede the current revenue
recognition guidance including IAS 18 Revenue. The Group will adopt
IFRS 15 for the year ending 31 December 2018.
The standard introduces a five-step approach to revenue
recognition - identifying the contract; identifying the performance
obligations in the contract; determining the transaction price;
allocating that transaction price to the performance obligations
and finally recognising the revenue as those performance
obligations are satisfied.
The Group recognises revenue from the following major income
streams:
Flight Support:
-- Fuelling & fuel farm management
-- Property management
-- Ground handling
-- Technical services
Aftermarket Services:
-- Repair & overhaul
-- Engine & part sales
An impact assessment has been performed on the likely impact of
IFRS 15:
Within the Aftermarket Services division the methodology
presently adopted for revenue recognition under the current
standard, IAS 18 Revenue, will not materially change under IFRS
15.
Within the Flight Support division it is also not expected that
IFRS 15 will have a material impact due to the nature of the
services provided - the cycle from order through to delivery of
these services is generally short.
The full impact of adopting IFRS 15 on the Consolidated
Financial Statements of the Group will depend on the Group's
activities during 2018. The Group has performed a preliminary
assessment of the potential impact of adopting IFRS 15 based on the
Group's historic trading as at the date of initial application of
IFRS 15 (1 January 2018). Management's expectations are that the
impact of IFRS 15 on the Group will not be material.
IFRS 16
IFRS 16 replaces existing leasing guidance, including IAS 17
'Leases' and IFRIC 4 'Determining whether an arrangement contains a
lease'. The standard is effective for annual periods beginning on
or after 1 January 2019.
The standard requires lessees to account for most contracts
under an on-balance sheet model, with the distinction between
operating and finance leases being removed.
The standard provides certain exemptions from recognising leases
on the balance sheet, including where the asset is of low value or
the lease term is 12 months or less. In addition, the standard
makes changes to the definition of a lease to focus on, amongst
other things, which party has the right to direct the use of the
asset.
Under the new standard, the Group will be required to recognise
right of use lease assets and lease liabilities on the balance
sheet. The right of use asset is initially measured at cost and
subsequently measured at cost (subject to certain exceptions) less
accumulated depreciation and impairment losses, adjusted for any
re-measurement of the lease liability. Liabilities are measured
based on the present value of future lease payments over the lease
term. Subsequently, the lease liability is adjusted for interest
and lease payments, as well as the impact of lease modifications,
amongst others.
The recognition of the depreciation of right of use lease assets
and interest on lease liabilities over the lease term will have no
overall impact on profit before tax over the life of the lease,
however the result in any individual year will be impacted and the
change in presentation of costs will likely be material to the
Group's key metrics. Under IAS 17, the charge is booked in full to
operating profit. Metrics which will therefore be affected will
include operating profit & operating margin, interest &
interest cover, EBITDA, ROIC and operating cash flow.
Furthermore, the principal amount of cash paid and interest in
the cash flow statement will be presented separately as a financing
activity. Operating lease payments under IAS 17 would have been
presented as operating cash flows. There will be no overall net
cash flow impact.
The Group has commenced work to understand the impact of the new
standard and the project will complete during 2018. Work will
include detailed review of contracts to establish lease
classification, assessment of transition options, the
quantification of financial impacts, design of future processes and
the related systems changes, the assessment of the related impacts
on the Group's regulatory and commercial reporting requirements and
the impact on the Group's long-term incentive schemes. It is
therefore not practicable to provide a reasonable estimate of the
financial effect until the directors complete their review.
Information on the undiscounted amount of the Group's operating
lease commitments under IAS 17 'Leases', the current leasing
standard, is disclosed in the Group's annual financial
statements.
Notes to the Consolidated Financial Statements
1. Segmental information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the 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 Flight Support, which
comprises Signature Flight Support and ASIG (until 31 January
2017), and Aftermarket Services, which comprises Engine Repair
& Overhaul (ERO) and Ontic.
The businesses within the Flight Support segment provide
refuelling, ground handling, line maintenance and other services to
the Business & General Aviation (B&GA) and commercial
aviation markets. The businesses within the Aftermarket Services
segment maintain and support engines and aerospace components,
sub-systems and systems.
Sales between segments are immaterial.
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
Flight Aftermarket Unallocated
Support(1) Services Total Corporate(2) Total
Business segments $m $m $m $m $m
===================================== =========== =========== ======= ============= =========
2017
External revenue
External revenue from continuing
and discontinued operations 1,681.4 727.6 2,409.0 - 2,409.0
Less external revenue from
discontinued operations, note
10 (38.4) - (38.4) - (38.4)
------------------------------------- ----------- ----------- ------- ------------- ---------
External revenue from continuing
operations 1,643.0 727.6 2,370.6 2,370.6
Underlying operating profit
Underlying operating profit
from continuing and discontinued
operations 329.2 65.3 394.5 (34.1) 360.4
Add underlying operating loss
from discontinued operations 0.2 - 0.2 - 0.2
Adjusted for intergroup charges
for discontinued operations(3) - - - - -
------------------------------------- ----------- ----------- ------- ------------- ---------
Underlying operating profit/(loss)
from continuing operations 329.4 65.3 394.7 (34.1) 360.6
Underlying operating margin
from continuing operations 20.0% 9.0% 16.6% 15.2%
Exceptional and other items
Exceptional and other items
from continuing and discontinued
operations (82.3) (31.7) (114.0) (9.0) (123.0)
Less exceptional and other
items from discontinued operations - - - - -
------------------------------------- ----------- ----------- ------- ------------- ---------
Exceptional and other items
from continuing operations (82.3) (31.7) (114.0) (9.0) (123.0)
Operating profit/(loss) from
continuing operations 247.1 33.6 280.7 (43.1) 237.6
Net finance costs (62.1)
------------------------------------- ----------- ----------- ------- ------------- ---------
Profit before tax from continuing
operations 175.5
Other information
===================================== =========== =========== ======= ============= =========
Capital additions** 60.0 25.3 85.3 - 85.3
Depreciation and amortisation 151.9 29.0 180.9 0.4 181.3
------------------------------------- ----------- ----------- ------- ------------- ---------
** Capital additions represent cash expenditures in
the year. Capital additions include additions to Property,
Plant & Equipment, and intangible assets including Ontic
licences not accounted for as acquisitions under IFRS
3.
Balance sheet
------------------------------------- ----------- ----------- ------- ------------- ---------
Total assets 3,196.3 763.8 3,960.1 110.4 4,070.5
Total liabilities (304.8) (176.8) (481.6) (1,655.7) (2,137.3)
------------------------------------- ----------- ----------- ------- ------------- ---------
Net assets/(liabilities) 2,891.5 587.0 3,478.5 (1,545.3) 1,933.2
------------------------------------- ----------- ----------- ------- ------------- ---------
Notes to the Consolidated Financial Statements - continued
1. Segmental information - continued
Flight Aftermarket Unallocated
Support(1) Services Total Corporate(2) Total
Business segments $m $m $m $m $m
===================================== =========== =========== ======= ============= =========
2016
External revenue
External revenue from continuing
and discontinued operations 1,860.0 705.9 2,565.9 - 2,565.9
Less external revenue from
discontinued operations, note
10 (416.8) - (416.8) - (416.8)
------------------------------------- ----------- ----------- ------- ------------- ---------
External revenue from continuing
operations 1,443.2 705.9 2,149.1 - 2,149.1
Underlying operating profit
Underlying operating profit
from continuing and discontinued
operations 303.9 42.0 345.9 (15.8) 330.1
Less underlying operating profit
from discontinued operations (9.9) - (9.9) 1.0 (8.9)
Adjusted for intergroup charges
for discontinued operations(3) - - - (18.6) (18.6)
------------------------------------- ----------- ----------- ------- ------------- ---------
Underlying operating profit/(loss)
from continuing operations 294.0 42.0 336.0 (33.4) 302.6
Underlying operating margin
from continuing operations 20.4% 5.9% 15.6% 14.1%
Exceptional and other items
Exceptional and other items
from continuing and discontinued
operations (117.4) (19.8) (137.2) - (137.2)
Less exceptional and other
items from discontinued operations 0.7 - 0.7 - 0.7
------------------------------------- ----------- ----------- ------- ------------- ---------
Exceptional and other items
from continuing operations (116.7) (19.8) (136.5) - (136.5)
Operating profit/(loss) from
continuing operations 177.3 22.2 199.5 (33.4) 166.1
Impairment of tangible and
intangible fixed assets (184.4)
Net finance costs (63.9)
------------------------------------- ----------- ----------- ------- ------------- ---------
Loss before tax from continuing
operations (82.2)
------------------------------------- ----------- ----------- ------- ------------- ---------
Other information
Capital additions** 74.2 38.7 112.9 0.1 113.0
Depreciation and amortisation 158.7 24.8 183.5 0.4 183.9
------------------------------------- ----------- ----------- ------- ------------- ---------
** Capital additions represent cash expenditures in
the year. Capital additions include additions to Property,
Plant & Equipment, and intangible assets including Ontic
licences not accounted for as acquisitions under IFRS
3.
Balance sheet
------------------------------------- ----------- ----------- ------- ------------- ---------
Total assets 3,515.7 747.5 4,263.2 148.5 4,411.7
Total liabilities (397.6) (233.2) (630.8) (1,862.3) (2,493.1)
------------------------------------- ----------- ----------- ------- ------------- ---------
Net assets/(liabilities) 3,118.1 514.3 3,632.4 (1,713.8) 1,918.6
------------------------------------- ----------- ----------- ------- ------------- ---------
1 Operating profit/(loss) from continuing operations includes
$3.4 million profit (2016: $13.4 million profit) of associates and
joint ventures.
2 Unallocated corporate balances include debt, tax, provisions,
insurance captives and trading balances from central
activities.
3 Costs previously allocated to ASIG.
Notes to the Consolidated Financial Statements - continued
1. Segmental information - continued
Capital Non-current
Revenue Revenue
by destination by origin additions(1) assets(2)
Geographical segments $m $m $m $m
======================================== =============== ========== ============== ===========
2017
United Kingdom 76.7 277.6 7.1 298.0
Mainland Europe 221.7 57.5 0.3 71.9
North America 2,017.7 2,051.1 75.9 2,955.2
Rest of World 92.9 22.8 2.0 5.9
---------------------------------------- --------------- ---------- -------------- -----------
Total from continuing and discontinued
operations 2,409.0 2,409.0 85.3 3,331.0
---------------------------------------- --------------- ---------- -------------- -----------
Less discontinued operations (38.4) (38.4) - -
---------------------------------------- --------------- ---------- -------------- -----------
Total from continuing operations 2,370.6 2,370.6 85.3 3,331.0
---------------------------------------- --------------- ---------- -------------- -----------
2016
United Kingdom 128.0 320.8 14.7 226.7
Mainland Europe 200.9 54.5 0.2 46.1
North America 2,098.5 2,148.0 92.1 3,117.2
Rest of World 138.5 42.6 6.0 23.5
---------------------------------------- --------------- ---------- -------------- -----------
Total from continuing and discontinued
operations 2,565.9 2,565.9 113.0 3,413.5
---------------------------------------- --------------- ---------- -------------- -----------
Less discontinued operations (416.8) (416.8) (10.3) -
---------------------------------------- --------------- ---------- -------------- -----------
Total from continuing operations 2,149.1 2,149.1 102.7 3,413.5
---------------------------------------- --------------- ---------- -------------- -----------
1 Capital additions represent cash expenditures in the year.
2 The disclosure of non-current assets by geographical segment
has been amended to exclude deferred tax of $0.1 million (2016:
$0.4 million) and financial instrument balances of $13.9 million
(2016: $13.6 million) in all periods, as required under IFRS 8.
An analysis of the Group's revenue for the year is as
follows:
Revenue from
sale of Revenue from
goods services
====================== ================ ================
2017 2016 2017 2016
$m $m $m $m
====================== ======= ======= ======= =======
Flight Support 1,126.8 1,027.2 554.6 832.8
Aftermarket Services 236.2 189.2 491.4 516.7
---------------------- ------- ------- ------- -------
1,363.0 1,216.4 1,046.0 1,349.5
---------------------- ------- ------- ------- -------
A portion of the Group's revenue from the sale of goods
denominated in foreign currencies is cash flow hedged. Revenue from
the sale of goods of $1,363.0 million (2016: $1,216.4 million)
includes a gain of $0.8 million (2016: gain of $1.2 million) in
respect of the recycling of the effective amount of foreign
currency derivatives used to hedge foreign currency revenue.
Notes to the Consolidated Financial Statements - continued
2. Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
Exceptional and other items
Underlying profit is shown before exceptional and other items on
the face of the income statement. Exceptional and other items are
items which are material and non-recurring in nature and also
include costs relating to acquisitions, disposals and
restructuring. Other items include 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.
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
Administrative Restructuring Administrative
Restructuring
expenses costs Total expenses costs
Other Other
operating operating
expenses expenses Total
2017 2017 2017 2017 2016 2016 2016 2016
Note $m $m $m $m $m $m $m $m
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Restructuring
expenses
ERO footprint
rationalisation - - 5.6 5.6 - - 9.9 9.9
H+S Middle East
impairment
loss 6 - - 15.7 15.7 - - - -
Central costs
rationalisation - - 6.7 6.7 - - - -
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Acquisition
related
Amortisation of
intangible
assets arising
on
acquisition and
valued
in accordance
with
IFRS 3 93.8 - - 93.8 98.6 - - 98.6
Landmark
integration
costs - - - - - 24.9 - 24.9
Transaction
costs(1) - 0.1 - 0.1 - 1.5 - 1.5
Other - 1.1 - 1.1 - 1.6 - 1.6
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Operating loss
on
continuing
operations 93.8 1.2 28.0 123.0 98.6 28.0 9.9 136.5
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Impairment loss - - - - - - - 184.4
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Loss before tax
on
continuing
operations - - - 123.0 - - - 320.9
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Net impact of
United
States tax
reform - - - 20.5 - - - -
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Tax on other
exceptional
items - - - (39.0) - - - (102.4)
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Tax impact of
exceptional
and other items - - - (18.5) - - - (102.4)
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Loss for the
year
on continuing
operations - - - 104.5 - - - 218.5
Loss from
discontinued
operation, net
of
tax 10 - - - 22.5 - - - 97.5
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
Total
exceptional
and other items - - - 127.0 - - - 316.0
----------------- ---- -------------- ---------- ------------- ------- -------------- ---------- -------------- -------
1 All transaction costs presented as exceptional and other items
in 2017 relate to the acquisition by Ontic of GE's Aviation
portfolio, see note 9.
Net cash flow from exceptional items was an outflow of $12.7
million (2016: outflow of $63.5 million). Net cash flow from other
items was $nil (2016: $nil).
Notes to the Consolidated Financial Statements - continued
3. Income tax
2017 2016
Recognised in the Income Statement $m $m
======================================= ===== ======
Current tax expense 24.8 16.0
Adjustments in respect of prior years
- current tax (6.2) (1.6)
--------------------------------------- ----- ------
Current tax 18.6 14.4
Deferred tax 16.5 (78.7)
Adjustments in respect of prior years
- deferred tax (1.4) 1.4
--------------------------------------- ----- ------
Deferred tax 15.1 (77.3)
--------------------------------------- ----- ------
Income tax expense/(credit) for the
year from continuing operations 33.7 (62.9)
--------------------------------------- ----- ------
UK income tax is calculated at 19.25% (2016: 20.0%) of the
estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the relevant
jurisdictions.
On 22 December 2017, the United States enacted tax reform that
implements substantial changes to the federal tax system by
reducing the headline federal tax rate from 35% to 21% and limiting
interest deductions to a maximum of 30% of US EBITDA. The reduction
in the headline rate of tax has resulted in a revaluation of US
deferred tax balances amounting to a credit of $59.3 million.
Additionally, the group has re-measured a deferred tax asset
relating to financing costs from prior years amounting to a charge
of $54.5 million together with a current year charge of $22.3
million. Finally, the tax reform introduced a tax on repatriation
of profits of overseas subsidiaries resulting in a charge of $3
million.
The net impact of this tax reform ($20.5m charge) has been
reflected in the continuing exceptional and other items tax result
so as to reflect the underlying effective tax rate on a consistent
basis to prior periods.
The total charge for the year can be reconciled to the
accounting profit as follows:
2017 2016
$m $m
============================================= ====== ======
Profit / (loss) before tax on continuing
operations 175.5 (82.2)
Tax at the rates prevailing in the relevant
tax jurisdictions 26.4% (2016: 25.3%) 46.3 (20.8)
Tax effect of offshore financing net
of UK CFC charge (37.0) (34.1)
Tax effect of expenses that are not
deductible in determining taxable profit 6.4 16.6
Tax effect of US tax reform 20.5 -
Items on which deferred tax has not
been recognised 0.8 1.3
Tax rate changes (excluding US tax reform) (0.5) 0.2
Difference in tax rates on overseas
earnings 4.8 (25.9)
Adjustments in respect of prior years (7.6) (0.2)
--------------------------------------------- ------ ------
Tax expense/(credit) for the year 33.7 (62.9)
--------------------------------------------- ------ ------
The applicable tax rate of 26.4% (2016: 25.3%) represents a
blend of the tax rates of the jurisdictions in which taxable
profits have arisen.
The change from the prior year is due to a change in the
proportion of profits that have arisen in each jurisdiction and the
benefits associated with certain financing structures
implemented.
Tax credited/(expensed) to other comprehensive income and equity
is as follows:
2017 2016
Recognised in other comprehensive income $m $m
=============================================== ===== =====
Tax on items that will not be reclassified
subsequently to profit or loss
Current tax credit on pension deficit
payments 0.5 0.5
Deferred tax (credit)/charge on actuarial
gains/(losses) (1.6) 9.3
----------------------------------------------- ----- -----
(1.1) 9.8
----------------------------------------------- ----- -----
Tax on items that may be reclassified
subsequently to profit or loss
Current tax credit on foreign exchange
movements (1.6) 0.7
Deferred tax charge on derivative instruments (2.7) 2.1
----------------------------------------------- ----- -----
(4.3) 2.8
----------------------------------------------- ----- -----
Total tax (charge)/credit within other
comprehensive income (5.4) 12.6
----------------------------------------------- ----- -----
Recognised in equity
Current tax credit on share-based payments
movements 0.8 0.1
Deferred tax credit/(charge) on share-based
payments movements - 0.6
----------------------------------------------- ----- -----
Total tax credit/(charge) within equity 0.8 0.7
----------------------------------------------- ----- -----
Total tax (charge)/credit within other
comprehensive income and equity (4.6) 13.3
----------------------------------------------- ----- -----
4. Dividends
On 19 May 2017, the 2016 final dividend of 9.12c per share
(total dividend $91.5 million) was paid to shareholders (2016: the
2015 final dividend of 8.68c per share (total dividend $87.2
million) was paid on 20 May 2016).
On 3 November 2017, the 2017 interim dividend of 3.81c per share
(total dividend $39.2 million) was paid to shareholders (2016: the
2016 interim dividend of 3.63c per share (total dividend $37.1
million) was paid on 4 November 2016).
In respect of the current year, the directors propose that a
final dividend of 9.59c per share will be paid to shareholders on
25 May 2018. The proposed dividend is payable to all shareholders
on the register of members on 13 April 2018. The total estimated
dividend to be paid is $98.6 million. This dividend is subject to
approval by shareholders at the AGM and, in accordance with IAS 10:
Events after the Reporting Period, has not been included as a
liability in these financial statements.
Notes to the Consolidated Financial Statements - continued
5. Earnings per share
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
The calculation of the basic and diluted earnings per share is
based on the following data:
Continuing Total
====================================================== ================ ================
2017 2016 2017 2016
$m $m $m $m
====================================================== ======= ======= ======= =======
Basic and diluted
Earnings:
Profit/(loss) for the year 141.8 (19.3) 119.3 (98.9)
Non-controlling interests 0.1 (0.4) 0.1 -
------------------------------------------------------ ------- ------- ------- -------
Basic earnings attributable to ordinary shareholders 141.9 (19.7) 119.4 (98.9)
Exceptional items (net of tax) 104.5 218.5 127.0 316.0
------------------------------------------------------ ------- ------- ------- -------
Adjusted earnings for adjusted earnings per share 246.4 198.8 246.4 217.1
------------------------------------------------------ ------- ------- ------- -------
Underlying deferred tax 47.7 27.7 47.7 35.6
------------------------------------------------------ ------- ------- ------- -------
Adjusted earnings for tax adjusted earnings per
share 294.1 226.5 294.1 252.7
------------------------------------------------------ ------- ------- ------- -------
Number of shares
Weighted average number of 29(16) /(21) p ordinary
shares:
------------------------------------------------------ ------- ------- ------- -------
For basic earnings per share 1,028.2 1,026.6 1,028.2 1,026.6
------------------------------------------------------ ------- ------- ------- -------
Dilutive potential ordinary shares from share
options 10.6 9.9 10.6 9.9
------------------------------------------------------ ------- ------- ------- -------
For diluted earnings per share 1,038.8 1,036.5 1,038.8 1,036.5
------------------------------------------------------ ------- ------- ------- -------
For diluted losses per share 1,028.2 1,026.6 1,028.2 1,026.6
------------------------------------------------------ ------- ------- ------- -------
Earnings per share
Basic:
Adjusted 24.0c 19.4c 24.0c 21.1c
Cash 28.6c 22.1c 28.6c 24.6c
Unadjusted 13.8c (1.9)c 11.6c (9.6)c
Diluted:
Adjusted 23.7c 19.2c 23.7c 20.9c
Cash 28.3c 21.9c 28.3c 24.4c
Unadjusted 13.7c (1.9)c 11.5c (9.6)c
Cash earnings per share is presented calculated on earnings
before exceptional and other items (note 2) 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 2). Both adjustments have
been made because the directors consider that this gives a useful
indication of underlying performance.
For discontinued earnings per share, refer to note 10.
Notes to the Consolidated Financial Statements - continued
6. Intangible assets
Licences Licences
and Computer and Computer
Goodwill contracts software Total Goodwill contracts software Total
2017 2017 2017 2017 2016 2016 2016 2016
$m $m $m $m $m $m $m $m
======================== ========= ============ =========== ======= ========= ============ =========== =======
Cost
Beginning of year 1,252.7 1,586.1 42.8 2,881.6 889.6 360.9 47.7 1,298.2
Exchange adjustments 9.2 17.7 0.3 27.2 (10.0) (16.3) (0.6) (26.9)
Acquisitions 0.9 24.3 - 25.2 557.7 1,251.7 - 1,809.4
Acquisitions in prior
years - - - - - 0.7 - 0.7
Additions - 0.3 6.6 6.9 - 0.2 0.6 0.8
Impairment charges - (11.0) - (11.0) (114.0) (0.2) - (114.2)
Transfer to assets
held for sale - - - - (70.6) (16.3) (1.5) (88.4)
Disposals - (0.1) (3.1) (3.2) - - (0.3) (0.3)
Transfers (to)/from
other asset categories 4.0 (3.5) 6.6 7.1 - 5.4 (3.1) 2.3
------------------------ --------- ------------ ----------- ------- --------- ------------ ----------- -------
End of year 1,266.8 1,613.8 53.2 2,933.8 1,252.7 1,586.1 42.8 2,881.6
------------------------ --------- ------------ ----------- ------- --------- ------------ ----------- -------
Amortisation
Beginning of year (138.8) (223.1) (27.5) (389.4) - (115.0) (27.4) (142.4)
Exchange adjustments (1.4) (3.4) (0.3) (5.1) - 5.2 0.6 5.8
Amortisation charge
for the year - (104.5) (5.4) (109.9) - (112.0) (2.2) (114.2)
Impairment charges - 5.3 - 5.3 (138.8) (12.8) - (151.6)
Transfer to assets
held for sale - - - - - 10.6 1.1 11.7
Disposals - - 3.1 3.1 - - 0.3 0.3
Transfers to other
asset categories - 3.1 (3.0) 0.1 - 0.9 0.1 1.0
------------------------ --------- ------------ ----------- ------- --------- ------------ ----------- -------
End of year (140.2) (322.6) (33.1) (495.9) (138.8) (223.1) (27.5) (389.4)
------------------------ --------- ------------ ----------- ------- --------- ------------ ----------- -------
Carrying amount
End of year 1,126.6 1,291.2 20.1 2,437.9 1,113.9 1,363.0 15.3 2,492.2
------------------------ --------- ------------ ----------- ------- --------- ------------ ----------- -------
Beginning of year 1,113.9 1,363.0 15.3 2,492.2 889.6 245.9 20.3 1,155.8
------------------------ --------- ------------ ----------- ------- --------- ------------ ----------- -------
Included within the amortisation charge for intangible assets of
$109.9 million (2016: $114.2 million) is amortisation of
$93.8million (2016: $99.4 million) in relation to the amortisation
of intangible assets acquired and valued in accordance with IFRS 3
and disclosed within exceptional and other items.
Included within the acquisitions of $25.2 million (2016:
$1,809.4 million) is $5.0 million (2016: $2.5 million) of Ontic
licence acquisitions which are not accounted for as a business
combination under IFRS 3 and hence not presented under note 9.
Licences and contracts are amortised over the period to which
they relate, which is on average 16 years (2016: 16 years) but with
a wider range, with some up to 60 years in duration. Computer
software is amortised over its estimated useful life, which is on
average five years (2016: five years).
Transfers to assets held for sale relates to the ASIG business
as disclosed in note 10.
Impairment losses recognised in the year
During 2017 the Group's H+S Middle East business (part of the
H+S CGU) continued to underperform. As a result of this
underperformance management carried out an impairment review to
assess the recoverability of the remaining assets of the business
following the CGU impairment in 2016. The review led to an
impairment loss of $15.7 million that has been recognised within
exceptional and other items in 2017. The $15.7 million impairment
was recognised against $5.7 million of Intangible assets and $10.0
million of Property, Plant & Equipment. H+S Middle East is
contained within the Group's Aftermarket Services operating
segment.
Notes to the Consolidated Financial Statements - continued
6. Intangible assets - continued
Goodwill
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units (CGUs) that are expected
to benefit from the business combination. The carrying amount of
goodwill has been allocated as follows and reflects certain
aggregated CGUs:
2017 2016
$m $m
================================================= ======= =======
Flight Support:
Signature Flight Support 1,058.3 1,048.7
ASIG (discontinued operations) - 70.6
Aftermarket Services:
Engine Repair & Overhaul - -
Ontic 68.3 65.2
------------------------------------------------- ------- -------
Total goodwill from continuing and discontinued
operations 1,126.6 1,184.5
------------------------------------------------- ------- -------
Total goodwill from continuing operations 1,126.6 1,113.9
------------------------------------------------- ------- -------
Total goodwill from discontinued operations - 70.6
------------------------------------------------- ------- -------
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired.
The Group has determined the recoverable amount of each CGU from
value-in-use calculations. The value-in-use calculations are based
on cash flow forecasts derived from the most recent budgets and
detailed financial projections for the next four years, as approved
by management, with a terminal growth rate after four years. The
resultant cash flows are discounted using a pre-tax discount rate
appropriate for the relevant CGU.
Key assumptions
The key assumptions for the value-in-use calculations are as
follows.
Sales volumes, selling prices and cost increases over the four
years covered by management's detailed plans
Sales volumes are based on industry forecasts and management
estimates for the businesses in which each CGU operates, including
forecasts for Business & General Aviation (B&GA) flying
hours, aircraft engine cycles and military spending. Selling prices
and cost increases are based on past experience and management
expectations of future changes in the market. The extent to which
these assumptions affect each principal CGU with a significant
level of goodwill are described below.
Signature Flight Support and Engine Repair & Overhaul (ERO)
both operate in the B&GA market. Signature Flight Support is
the world's largest and market-leading Fixed Base Operation (FBO)
network for business aviation providing full services support for
B&GA travel, focused on passenger handling and customer
amenities such as refuelling, hangar and office rentals, and other
technical services. ERO is a leading independent engine repair
service provider to the B&GA market with strong relationships
with all major engine OEMs.
Ontic operates in the military and commercial sectors and is the
leading provider of high-quality, cost-effective solutions in the
continuing support of maturing aerospace platforms to the major
aerospace OEMs and airframe operators.
In B&GA, growth is measured principally in relation to
B&GA flying hours. Over the longer term, the key drivers for
B&GA remain intact - continued growth in GDP and total wealth,
the increasing value of people's time, corporate confidence and
corporate activity levels all point to improving sentiment. The
unusual nature of the 2007-2009 crisis and the halting return to
growth have meant that, although corporate profits have recovered
and confidence has improved, flight activity has lagged. However,
steady growth in US GDP and the current upward trend in US business
confidence supports a continued increase in B&GA movements in
the USA with the FAA currently forecasting an average growth in
B&GA Jet and Turboprop flying hours of 2.5% per annum to
2037.
The political environment in the USA could also be positive in
the short and medium-term, with commentators speculating that the
new US tax policy could be marginally beneficial to jet
purchases.
Trends in military aviation are likely to improve as the global
defence market recovers after years of pressure due to budget
retrenchment. The perceived and continuing threat environment and
regional tensions are expected to be the biggest driver of
spending.
US defence spending represents approximately 34% of global
spending and this grew in 2017 driven by the new administration's
focus on strengthening the nation's military. The USA accounts for
26% of the global military aviation fleet (c13,800 aircraft).
Budget growth and a higher tempo of military operations are
expected to positively impact flight activity and thus maintenance
spend as more missions are executed.
Life extension programmes continue to be important as the US
military aircraft ages. Military legacy aircraft life extensions of
between seven and ten years on platforms such as the C-130, ACV-8B,
F-15 and AH-64 and delays on new aircraft, such as the F-35 and
A400M are key drivers for our Ontic business. The current US Air
Force fleet is more than 25 years old on average, with some
platforms significantly older. Average age is expected to continue
to rise despite the large defence budget increases.
Growth rates used for the periods beyond those covered by
management's detailed plans
Growth rates are derived from management's estimates, which take
into account the long-term nature of the industry in which each CGU
operates, external industry forecasts of long-term growth in the
aerospace and defence sectors, the maturity of the platforms
supplied by the CGU and the technological content of the CGU's
products. For the purpose of impairment testing, a conservative
approach has been used and where the derived rate is higher than
the long-term GDP growth rates for the countries in which the CGU
operates, the latter has been used. As a result, an estimated
growth rate of 2.0% (2016: 2.0%) has been used for the Flight
Support and Ontic CGUs, which reflects forecast long-term US GDP
growth. ERO has an estimated long-term growth rate of 1% as set out
in more detail in the following section on ERO impairment.
Notes to the Consolidated Financial Statements - continued
6. Intangible assets - continued
Discount rates applied to future cash flows
The Group's pre-tax weighted average cost of capital (WACC) has
been used as the foundation for determining the discount rates to
be applied. The WACC has then been adjusted to reflect risks
specific to the CGU not already reflected in the future cash flows
for that CGU. The discount rate used was 7.5% (2016: 7.3%) for the
CGUs within Flight Support and 9.9% to 10.0% (2016: 9.4% to 9.6%)
for the CGUs within Aftermarket Services.
Sensitivity analysis
Both the ERO CGUs, Dallas Airmotive (DAI) and H&S Aviation
(H+S), recognised impairments in 2016, see below.
In relation to ASIG CGUs, the operations were held for sale at
31 December 2016 and subsequently have been sold. The business'
assets were impaired in 2016 based on the fair market value
established in that disposal process, see note 10.
In relation to Signature Flight Support and Ontic, management
has concluded that for these CGUs no reasonably foreseeable change
in the key assumptions used in the impairment model would result in
a significant impairment charge being recorded in the financial
statements.
ERO impairment
In 2016 both the ERO CGUs recognised impairment. Management had
previously reported that a reasonably possible change in the key
assumptions used in the impairment model could result in an
impairment charge for Dallas Airmotive ("DAI").
The ERO trading conditions remained challenging during 2016,
with no recovery in legacy mid-cabin fixed wing and rotorcraft
flying visible for the engine platforms on which ERO operates.
This, coupled with continued pressure on pricing and workscopes,
led to another disappointing ERO result. Engine trading was much
reduced and that, together with further margin pressure arising
from OEM actions, and reduced demand for lease engines, was only
partially offset by the limited cost savings delivered through the
footprint restructuring programme and additional cost reduction
actions. As a result of this performance and with no visible
recovery in legacy mid-cabin fixed wing and rotorcraft flying, an
impairment review was carried out at 30 June 2016 for both the DAI
and H+S CGUs within the ERO business.
The key assumptions for the value-in-use calculations were
consistent with the 2016 year end goodwill impairment test, with
the exception of discount rates which were adjusted to reflect
risks specific to each CGU but had not already been reflected in
the future cash flows for that CGU. Full detail of the assumptions
used in the ERO impairment test are set out in the 2016 Annual
Report and Accounts.
Notes to the Consolidated Financial Statements - continued
7. Borrowings
2017 2016
$m $m
=============================================== ======= =======
Bank overdrafts 4.0 1.0
Bank loans 813.3 1,036.2
Loan notes 502.2 507.3
Other loans 3.3 3.2
----------------------------------------------- ------- -------
1,322.8 1,547.7
----------------------------------------------- ------- -------
The borrowings are repayable as follows:
On demand or within one year 124.2 1.0
In the second year 369.3 121.8
In the third to fifth years inclusive 619.6 1,214.4
After five years 209.7 210.5
----------------------------------------------- ------- -------
1,322.8 1,547.7
Less: Amount due for settlement within
12 months (shown within current liabilities) (124.2) (1.0)
----------------------------------------------- ------- -------
Amount due for settlement after 12 months 1,198.6 1,546.7
----------------------------------------------- ------- -------
Current year bank loans and loan notes are stated after their
respective transaction costs and related amortisation.
Notes to the Consolidated Financial Statements - continued
7. Borrowings - continued
2017
---------------------------- -------------------------------------------------------------------------------------
Fair
Facility Amortisation value
amount Headroom Principal costs adjustment Drawn Facility Maturity
Type $m $m $m $m $m $m date date
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Multicurrency revolving Apr Apr
bank credit facility 650.0 535.0 115.0 (1.2) - 113.8 2014 2019
Acquisition facility
bank term loan - Facility Sep Feb
B 253.4 - 253.4 (1.0) - 252.4 2015 2019
Acquisition facility
Bank term loan - Facility Sep Sep
C 450.0 - 450.0 (2.9) - 447.1 2015 2020
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank loans 1,353.4 535.0 818.4 (5.1) - 813.3
$300m US private placement
senior notes - Series May May
A 120.0 - 120.0 (0.3) 0.5 120.2 2011 2018
$300m US private placement
senior notes - Series May May
B 120.0 - 120.0 (0.3) 2.3 122.0 2011 2021
$300m US private placement
senior notes - Series May May
C 60.0 - 60.0 (0.2) (0.3) 59.5 2011 2023
$200m US private placement
senior notes - Series Dec Dec
A 50.0 - 50.0 (0.1) 0.7 50.6 2014 2021
$200m US private placement
senior notes - Series Dec Dec
B 100.0 - 100.0 (0.3) 0.1 99.8 2014 2024
$200m US private placement
senior notes - Series Dec Dec
C 50.0 - 50.0 (0.1) 0.2 50.1 2014 2026
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total loan notes 500.0 - 500.0 (1.3) 3.5 502.2
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank and loan
notes 1,853.4 535.0 1,318.4 (6.4) 3.5 1,315.5
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Bank overdraft - UK
cash pool 4.0
Other loans 3.3
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
1,322.8
---------------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
During the year, the Group prepaid $110 million of the
acquisition bank term debt Facility B which related to part of the
net proceeds from the disposal of ASIG in accordance with the loan
documentation.
Notes to the Consolidated Financial Statements - continued
7. Borrowings - continued
2016
====================== =====================================================================================
Fair
Facility Amortisation value
amount Headroom Principal costs adjustment Drawn Facility Maturity
Type $m $m $m $m $m $m date date
====================== ======== ======== ========= ============ =========== ======= ======== ========
Multicurrency
revolving bank Apr Apr
credit facility 650.0 420.0 230.0 (1.8) - 228.2 2014 2019
Acquisition facility
bank term loan Sep Feb
- Facility B(1) 363.4 - 363.4 (1.8) - 361.6 2015 2019
Acquisition facility
Bank term loan Sep Sep
- Facility C(1) 450.0 - 450.0 (3.6) - 446.4 2015 2020
---------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank loans 1,463.4 420.0 1,043.4 (7.2) - 1,036.2
$300m US private
placement senior
notes - Series May May
A 120.0 - 120.0 (0.3) 2.1 121.8 2011 2018
$300m US private
placement senior
notes - Series May May
B 120.0 - 120.0 (0.3) 4.1 123.8 2011 2021
$300m US private
placement senior
notes - Series May May
C 60.0 - 60.0 (0.2) 0.2 60.0 2011 2023
$200m US private
placement senior
notes - Series Dec Dec
A 50.0 - 50.0 (0.2) 1.7 51.5 2014 2021
$200m US private
placement senior
notes - Series Dec Dec
B 100.0 - 100.0 (0.3) 0.4 100.1 2014 2024
$200m US private
placement senior
notes - Series Dec Dec
C 50.0 - 50.0 (0.2) 0.3 50.1 2014 2026
---------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total loan notes 500.0 - 500.0 (1.5) 8.8 507.3
---------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank and
loan notes 1,963.4 420.0 1,543.4 (8.7) 8.8 1,543.5
---------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Bank overdraft
- UK cash pool 1.0
Other loans 3.2
---------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
1,547.7
---------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
1 Initial drawings under the Landmark Aviation acquisition debt
facilities were for $1,000 million drawn under three facilities -
Facility A, Facility B and Facility C. Facility A was a short-term
bridge to disposal facility which was fully repaid on 30 June 2016
from the proceeds of $187 million from the disposal of the FBO
bases as part of the requirements of the U.S. Department of Justice
under the terms of the regulatory approval following the
acquisition of Landmark Aviation. The balance of the proceeds of
$37 million were used to prepay part of Facility B under the
requirements of the loan documentation.
As at 31 December 2017, the Group had $500 million of US private
placement senior loan notes outstanding with $400 million accounted
for at fair value through profit and loss as the fair value
interest rate risk has been hedged from fixed to floating rates.
The remainder is accounted for at amortised cost.
Under IFRS hedge accounting rules the fair value movement on the
loan notes is booked to interest and is offset by the fair value
movement on the underlying interest rate swaps.
The Group includes the fair value gain on the interest rate
swaps in relation to the loan notes within net debt so that the net
effect is to show the $500 million US private placement at face
value and to reflect the fact that the liabilities will be in place
until maturity.
All other borrowings are held at amortised cost.
Notes to the Consolidated Financial Statements - continued
7. Borrowings - continued
The carrying amounts of the Group's borrowings are denominated
in the following currencies:
US
Sterling dollar Euro Total
$m $m $m $m
================== ========= ======== ===== =======
31 December 2017
Bank overdrafts 2.9 0.4 0.7 4.0
Bank loans - 813.3 - 813.3
Loan notes - 502.2 - 502.2
Other loans 0.3 3.0 - 3.3
------------------- --------- -------- ----- -------
3.2 1,318.9 0.7 1,322.8
------------------ --------- -------- ----- -------
31 December 2016
Bank overdrafts 0.2 - 0.8 1.0
Bank loans - 1,036.2 - 1,036.2
Loan notes - 507.3 - 507.3
Other loans 0.2 3.0 - 3.2
------------------- --------- -------- ----- -------
0.4 1,546.5 0.8 1,547.7
------------------ --------- -------- ----- -------
The average floating interest rates on borrowings are as
follows:
2017 2016
=========== ===== =====
Sterling 1.3% 1.4%
US dollar 3.1% 2.5%
Euros 0.0% 0.0%
----------- ----- -----
The Group's borrowings are funded through a combination of fixed
and floating rate debt. The floating rate debt exposes the Group to
cash flow interest rate risk whilst the fixed rate US dollar
private placement loan notes exposes the Group to changes in the
fair value of fixed rate debt due to changes in interest rates.
Interest rate risk is managed by the combination of fixed rate debt
and interest rate swaps in accordance with pre-agreed policies and
authority limits. As at 31 December 2017, 55% (2016: 65%) of the
Group's borrowings are fixed at a weighted average interest rate of
3.5% (2016: 3.3%) for a weighted average period of three years
(2016: three years).
Bank overdrafts are repayable on demand. All bank loans and loan
notes are unsecured.
Notes to the Consolidated Financial Statements - continued
8. Cash flow from operating activities
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
2017 2016
$m $m
============================================================ ====== =======
Operating profit 237.6 166.1
Operating profit from discontinued operations (0.2) 26.8
Share of profit from associates and joint ventures (3.4) (13.4)
------------------------------------------------------------ ------ -------
Profit from operations 234.0 179.5
Depreciation of property, plant and equipment 71.4 69.7
Amortisation of intangible assets 109.9 114.2
Profit on sale of property, plant and equipment (2.2) (4.3)
Share-based payment expense 9.9 6.1
Decrease in provisions (7.3) (7.8)
Pension scheme payments (5.1) (6.6)
Non-cash impairment 15.7 -
Other non-cash items 1.3 2.5
Unrealised foreign exchange movements (0.5) 1.3
------------------------------------------------------------ ------ -------
Operating cash inflows before movements in working capital 427.1 354.6
(Increase)/decrease in working capital (46.3) 36.1
------------------------------------------------------------ ------ -------
Cash generated by operations 380.8 390.7
Net income taxes paid (41.8) (15.8)
------------------------------------------------------------ ------ -------
Net cash inflow from operating activities 339.0 374.9
------------------------------------------------------------ ------ -------
Dividends received from associates 2.4 2.4
Purchase of property, plant and equipment (73.4) (101.6)
Purchase of intangible assets* (6.9) (0.8)
Proceeds from disposal of property, plant and equipment 16.8 11.1
Interest received 3.3 2.7
Interest paid (60.5) (64.5)
Interest element of finance leases paid (0.1) (0.1)
------------------------------------------------------------ ------ -------
Free cash flow 220.6 224.1
------------------------------------------------------------ ------ -------
* Purchase of intangible assets excludes $5.0 million (2016:
$10.6 million) paid in relation to Ontic licences, not accounted
for as acquisitions under IFRS 3since 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.
Notes to the Consolidated Financial Statements - continued
9. Acquisition of businesses
During the period the Group made the following acquisitions:
On 30 November 2017, the Group's Ontic business acquired
intellectual property for designed motor components for aerospace
use from Hamiltonian Sunstrand Corporation ("HSC"), a UTC Aerospace
Systems company ("UTAS") for a total consideration of $2.3
million.
On 29 November 2017, the Group's Ontic business acquired an
Ethernet Switch Unlit (ESU) product line for use in military ground
combat vehicles from Curtiss-Wright Defense Solutions (CW) for a
total consideration of $5.0 million.
On 31 October 2017, the Group's Ontic business acquired from
Ultra Electronics Plc ("Ultra") the intellectual property to
support a variety of parts that are fitted onto the Hawk platform
for a total consideration of GBP3.8 million or $4.9 million.
On 29 March 2017, the Group's Ontic business acquired the
manufacturing rights and processes from Pratt & Whitney Canada
for selected JT15D engine component parts for a total consideration
of $1.9 million, of which is $0.7 million is deferred.
As disclosed in the 2016 Annual Report and Accounts, Ontic
completed the acquisition of the GE Aviation portfolio and the Q400
parts series. The purchase price accounting has been finalised with
the measurement period adjustments tabulated over the page. In the
year, an increase in goodwill of $0.9 million has been recognised
as a result of completing final fair value exercise for Ontic's GE
Aviation portfolio acquisition.
Notes to the Consolidated Financial Statements - continued
9. Acquisition of businesses - continued
The fair value of the net assets acquired, measurement period
adjustments and goodwill arising on these acquisitions are set out
below:
Total
Aftermarket
Services 2017
$m $m
====================================== === =========== ======
Intangible assets 17.9 17.9
Inventories (0.3) (0.3)
Receivables (0.5) (0.5)
Payables 0.6 0.6
Provisions (3.1) (3.1)
Taxation (1.4) (1.4)
Net assets 13.2 13.2
Non-controlling interests - -
Goodwill 0.9 0.9
------------------------------------------- ----------- ------
Total consideration
(including deferred consideration) 14.1 14.1
------------------------------------------- ----------- ------
Satisfied by:
Cash 13.4 13.4
Deferred consideration 0.7 0.7
Net cash consideration 14.1 14.1
------------------------------------------- ----------- ------
Net cash flow arising on acquisition
Cash consideration 13.4 13.4
------------------------------------------- ----------- ------
13.4 13.4
------------------------------------------ ----------- ------
All acquisition costs incurred in the year are in relation to
the acquisition of Ontic's GE Aviation portfolio. These costs were
recognised as part of transaction costs under exceptional and other
items. Refer to note 2 for further details.
In 2017, $0.8 million of deferred consideration was paid in
relation to prior year acquisitions in Signature, $60.7 million was
paid in relation to the Ontic GE Aviation portfolio and $0.8
million was paid in relation to prior year acquisitions in Ontic.
In the prior year, $0.8 million of deferred consideration was paid
in relation to prior year acquisitions in Ontic.
The goodwill arising on these acquisitions is attributable to
anticipated future operating synergies. $0.9 million of the
goodwill is expected to be deductible for income tax purposes.
In the period since acquisition, the operations acquired have
contributed $0.6 million and $0.3 million to revenue and operating
profit respectively. If the acquisitions had occurred on the first
day of the financial year, it is estimated that the total revenue
and operating profit from these acquisitions would have been $5.6
million and $1.2 million respectively.
Notes to the Consolidated Financial Statements - continued
10. Disposals and assets and associated liabilities classified
as held for sale
ASIG divestiture
It was announced in March 2016 that, following significant
inbound interest, management was assessing value maximising options
for the Group's investment in the ASIG business, part of the Flight
Support segment. At the beginning of April 2016, management
committed to a plan to sell substantially all of the ASIG 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 ASIG operations were also classified as a
discontinued operation.
On 16 September 2016, the Group announced that it had reached
agreement with John Menzies plc on the terms of the sale of the
ASIG business. The transaction completed on 31 January 2017.
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 discontinued operations
2017 2016
========================= ====== ==================================== =====================================
Exceptional Exceptional
and and
other other
Underlying(1) items Total Underlying(1) items Total
Notes $m $m $m $m $m $m
========================= ====== ============== ============ ====== ============== ============ =======
Revenue 1 38.4 - 38.4 416.8 - 416.8
Cost of sales (35.9) - (35.9) (373.9) - (373.9)
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
Gross profit 2.5 - 2.5 42.9 - 42.9
Distribution costs - - - (2.0) - (2.0)
Administrative
expenses (2.7) - (2.7) (31.9) (0.7) (32.6)
Other operating
income - - - 1.1 - 1.1
Share of profits
of associates and
joint ventures - - - - - -
Other operating
expenses - - - (1.2) - (1.2)
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
Operating (loss)/profit
incl. group charges (0.2) - (0.2) 8.9 (0.7) 8.2
Elimination of
internal group
charges - - - 18.6 - 18.6
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
Operating (loss)/profit 1 (0.2) - (0.2) 27.5 (0.7) 26.8
Impairment and
other charges on
classification
as held for sale(2) - (6.6) (6.6) - (109.1) (109.1)
Investment income - - - 0.3 - 0.3
Finance costs - - - (0.4) - (0.4)
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
(Loss)/profit before
tax (0.2) (6.6) (6.8) 27.4 (109.8) (82.4)
Tax (charge)/credit 0.2 (15.9) (15.7) (9.5) 12.3 2.8
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
(Loss)/profit for
the period - (22.5) (22.5) 17.9 (97.5) (79.6)
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
Attributable to:
Equity holders
of BBA Aviation
plc - (22.5) (22.5) 18.3 (97.5) (79.2)
Non-controlling
interests - - - (0.4) - (0.4)
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
Profit/(loss) for
the period - (22.5) (22.5) 17.9 (97.5) (79.6)
------------------------- ------ -------------- ------------ ------ -------------- ------------ -------
Earnings per share Note Adjusted(1) Unadjusted Adjusted(1) Unadjusted
==================== ===== ============ =========== ============ ===========
Basic 5 - (2.2)c 1.7c (7.7)c
Diluted 5 - (2.2)c 1.7c (7.7)c
-------------------- ----- ------------ ----------- ------------ -----------
1 Underlying profit and adjusted earnings per share is stated
before exceptional and other items.
2 The impairment of $6.6 million reported in exceptional and
other items includes the recycling of translational differences
accumulated in equity, additional disposal costs and the
gain/(loss) on disposal. In the prior year the impairment of $109.1
million reported in exceptional and other items includes $114.0
million impairment of net assets held for sale to fair value less
costs to sell, $1.0 million impairment of ASIG Singapore assets,
$6.3 million impairment of non-controlling interest reserve, $7.3
million of deal costs incurred in 2016, and a $19.5 million gain on
the right off of deferred tax assets and liabilities relating to
the disposal group.
All alternative performance measures are reconciled to IFRS
measures and explained in the alternative performance measures
section.
Notes to the Consolidated Financial Statements - continued
10. Disposals and assets and associated liabilities classified
as held for sale - continued
Cash flows from/(used in) discontinued operation
2017 2016
$m $m
===================================================== ==== ====== ======
Net cash inflow from operating activities (33.4) 18.8
Net cash outflow from investing activities - (10.0)
Net cash inflow/(outflow) from financing activities - (1.7)
----------------------------------------------------------- ------ ------
Net cash flows for the year(1) (33.4) 7.1
----------------------------------------------------------- ------ ------
1 Net cash flows for the year comprise the ($0.2 million)
operating loss, ($25.7 million) working capital movement, $0.9
million non-cash items and ($8.4 million) tax payment in relation
to the discontinued operation.
Effect of the disposal group on financial position of the
Group
2017 2016
Notes $m $m
============================================ ====== ===== ======
Assets held for sale
Non-current assets
Goodwill 6 - 70.6
Other intangible assets 6 - 6.1
Property, plant and equipment - 63.4
-------------------------------------------- ------ ----- ------
- 140.1
-------------------------------------------- ------ ----- ------
Current assets
Inventories - 4.0
Trade receivables - 72.9
Other receivables - 27.9
Cash and cash equivalents - 22.8
-------------------------------------------- ------ ----- ------
- 127.6
-------------------------------------------- ------ ----- ------
Total assets held for sale - 267.7
-------------------------------------------- ------ ----- ------
Liabilities held for sale
Current liabilities
Trade payables - (38.0)
Tax liabilities - (0.2)
Other payables - (33.6)
Borrowings - -
Provisions - (0.6)
-------------------------------------------- ------ ----- ------
- (72.4)
-------------------------------------------- ------ ----- ------
Non-current liabilities
Borrowings - -
Other payables - (16.9)
Provisions - -
-------------------------------------------- ------ ----- ------
- (16.9)
-------------------------------------------- ------ ----- ------
Total liabilities held for sale before tax - (89.3)
-------------------------------------------- ------ ----- ------
Net assets held for sale - 178.4
-------------------------------------------- ------ ----- ------
Notes to the Consolidated Financial Statements - continued
10. Disposals and assets and associated liabilities classified
as held for sale - continued
2016 FBO disposals
Under the terms of the regulatory approval in connection with
the acquisition of Landmark Aviation, the Company was required to
sell six legacy Landmark Aviation FBOs at: Westchester County
Airport, New York; Washington Dulles International Airport,
Virginia; Scottsdale Airport, Arizona; Ted Stevens Anchorage
International Airport, Alaska; Jacqueline Cochran Regional Airport,
California; and part of the Landmark facilities at Fresno Yosemite
International Airport. As a result, the six FBOs referred to above
were classified as a disposal group and held for sale from the date
of acquisition. Though the operations are wholly-owned by the
Group, as a result of the restrictions placed upon our influence by
the requirements of the U.S. Department of Justice, the results of
the operations were accounted for as an associate undertaking.
In March 2016, the Group announced the sale of six FBOs, as
agreed with the U.S. Department of Justice under the terms of the
regulatory approval for the acquisition of Landmark Aviation, for
an aggregate consideration of $190 million to affiliates of KSL
Capital Partners LLC (the transaction). The transaction closed on
30 June 2016.
Net cash proceeds totalled $184.7 million after adjusting for
the impact of working capital. There was no gain or loss recognised
on the transaction. In the period of the Group's ownership in 2016
the disposal group contributed $nil of revenues and $7.9 million of
underlying operating profit which is included in the share of
profits of associates and joint ventures in the Consolidated Income
Statement.
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.
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, adjusted basic and diluted earnings per ordinary
share, return on invested capital, operating cash flow, free cash
flow, cash conversion, and net debt. A reconciliation from these
adjusted performance measures to the nearest measure prepared in
accordance with IFRS is presented below. The alternative
performance measures we use may not be directly comparable with
similarly titled measures used by other companies.
Where applicable, divisional measures are calculated in
accordance with Group measures.
Exceptional and other items
The Group's income statement and segmental analysis separately
identify trading results before exceptional and other items. The
directors believe that presentation of the Group's results in this
way is relevant to an understanding of the Group's financial
performance, as exceptional and other items are identified by
virtue of their size, nature or incidence. This presentation is
consistent with the way that financial performance is measured by
management and reported to the Board and the Executive Committee
and assists in providing a meaningful analysis of the trading
results of the Group. In determining whether an event or
transaction is treated as an exceptional and other item, management
considers quantitative as well as qualitative factors such as the
frequency or predictability of occurrence.
Examples of charges or credits meeting the above definition and
which have been presented as exceptional items in the current
and/or prior years include costs relating to significant
acquisitions/disposals of significant businesses and investments,
significant business restructuring programmes, asset impairment
charges and impact of the US Tax Cuts and Job Act 2017. In the
event that other items meet the criteria, which are applied
consistently from year to year, they are 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 2 to the 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.
2017 2016
Organic revenue growth $m $m
========================================= === === === ======= =======
Reported revenue prior year (continuing
and discontinued) 2,565.9 2,129.8
Rebase for foreign exchange movements (8.4) (41.3)
Rebase for fuel price movements 90.7 (59.2)
Rebase for disposals (416.8) -
------------------------------------------------------------ ------- -------
Rebased comparative revenue 2,231.4 2,029.3
Reported revenue (continuing and
discontinued) 2,409.0 2,565.9
Rebase for disposals (note 10) (38.4) -
Less acquisitions (92.7) (567.6)
------------------------------------------------------------ ------- -------
Organic revenue 2,277.9 1,998.3
Organic revenue growth 2.1% (1.5%)
------------------------------------------------------------ ------- -------
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. We 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.
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
==================================== ======= =========== ============= ======= =========== =============
Revenue 2,409.0 2,370.6 38.4 2,565.9 2,149.1 416.8
Operating profit/(loss) 237.4 237.6 (0.2) 192.9 166.1 26.8
Exceptional and other items 123.0 123.0 - 137.2 136.5 0.7
------------------------------------ ------- ----------- ------------- ------- ----------- -------------
Underlying operating profit/(loss) 360.4 360.6 (0.2) 330.1 302.6 27.5
------------------------------------ ------- ----------- ------------- ------- ----------- -------------
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
============================= ====== =========== ============= ====== =========== =============
Operating margin 9.9% 10.0% (0.5%) 7.5% 7.7% 6.4%
Exceptional and other items 5.1% 5.2% - 5.4% 6.4% 0.2%
----------------------------- ------ ----------- ------------- ------ ----------- -------------
Underlying operating margin 15.0% 15.2% (0.5%) 12.9% 14.1% 6.6%
----------------------------- ------ ----------- ------------- ------ ----------- -------------
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 Group operating profit, the most directly
comparable IFRS measure, to reported and underlying Group EBITDA,
is set out below.
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
==================================== ====== =========== ============= ====== =========== =============
Operating profit/(loss) 237.4 237.6 (0.2) 192.9 166.1 26.8
Reported depreciation
and amortisation 181.3 181.1 0.2 183.9 180.5 3.4
------------------------------------ ------ ----------- ------------- ------ ----------- -------------
EBITDA 418.7 418.7 - 376.8 346.6 30.2
Reported depreciation
and amortisation 181.3 181.1 0.2 183.9 180.5 3.4
Amortisation presented
within exceptional and
other items (93.8) (93.8) - (99.3) (98.6) (0.7)
------------------------------------ ------ ----------- ------------- ------ ----------- -------------
Depreciation and amortisation
included in underlying
results 87.5 87.3 0.2 84.6 81.9 2.7
Underlying operating profit/(loss) 360.4 360.6 (0.2) 330.1 302.6 27.5
Depreciation and amortisation
included in underlying
results 87.5 87.3 0.2 84.6 81.9 2.7
------------------------------------ ------ ----------- ------------- ------ ----------- -------------
Underlying EBITDA 447.9 447.9 - 414.7 384.5 30.2
------------------------------------ ------ ----------- ------------- ------ ----------- -------------
Alternative Performance Measures - continued
Underlying profit before tax
Underlying profit before tax is a measure which seeks to reflect
the underlying performance of the Group that will contribute to
long-term sustainable profitable growth. As such, underlying profit
before tax excludes the impact of exceptional and other items. We
focus on the trends in underlying profit before tax.
A reconciliation from profit before tax, the most directly
comparable IFRS measure, to the underlying profit before tax, is
set out below.
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
================================= ====== =========== ============= ======= =========== =============
Profit/(loss) before tax 168.7 175.5 (6.8) (164.6) (82.2) (82.4)
Exceptional and other items 129.6 123.0 6.6 430.7 320.9 109.8
--------------------------------- ------ ----------- ------------- ------- ----------- -------------
Underlying profit/(loss) before
tax 298.3 298.5 (0.2) 266.1 238.7 27.4
--------------------------------- ------ ----------- ------------- ------- ----------- -------------
Underlying deferred tax
Cash adjusted basic and diluted earnings per ordinary share set
out in note 5 to the Consolidated Financial Statements are
calculated by removing exceptional and other items and underlying
deferred tax to better reflect the underlying basic and diluted
earnings per share.
A reconciliation from deferred tax, the most directly comparable
IFRS measure, to the underlying deferred tax, is set out below:
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
========================== ====== =========== ============= ======= =========== =============
Deferred tax (12.3) (15.1) 2.8 81.6 77.3 4.3
Exceptional deferred tax (35.4) (32.6) (2.8) (117.2) (105.0) (12.2)
-------------------------- ------ ----------- ------------- ------- ----------- -------------
Underlying deferred tax (47.7) (47.7) - (35.6) (27.7) (7.9)
-------------------------- ------ ----------- ------------- ------- ----------- -------------
Cash basic and diluted earnings per ordinary share
As set out in note 5 to the Consolidated Financial Statements,
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.
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
c c c c c c
================================== ====== =========== ============= ====== =========== =============
Basic earnings per share 11.6 13.8 (2.2) (9.6) (1.9) (7.7)
Adjustments for adjusted measure 17.0 14.8 2.2 34.2 24.0 10.2
---------------------------------- ------ ----------- ------------- ------ ----------- -------------
Cash basic earnings per share 28.6 28.6 - 24.6 22.1 2.5
---------------------------------- ------ ----------- ------------- ------ ----------- -------------
Diluted earnings per share 11.5 13.7 (2.2) (9.6) (1.9) (7.7)
Adjustments for adjusted measure 16.8 14.6 2.2 34.0 23.8 10.2
---------------------------------- ------ ----------- ------------- ------ ----------- -------------
Cash diluted earnings per share 28.3 28.3 - 24.4 21.9 2.5
---------------------------------- ------ ----------- ------------- ------ ----------- -------------
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 underlying operating profit for
ROIC by net assets for ROIC, both of which are at the same exchange
rate which is the average of the last 13 months' spot rate. The net
assets for ROIC are calculated by averaging the net assets over the
last 13 months.
A reconciliation from underlying operating profit to underlying
operating profit for ROIC is set out below. In addition, a
reconciliation from net assets, the most directly comparable IFRS
measure, to invested capital for ROIC, is set out below.
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
====================================== ========= =========== ============= ========= =========== ==============
Underlying operating profit 360.4 360.6 (0.2) 330.1 302.6 27.5
Adjustments for FX 0.1 0.1 - (0.1) (0.1) -
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
Underlying operating profit for
ROIC 360.5 360.7 (0.2) 330.0 302.5 27.5
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
Net assets 1,933.2 1,933.2 - 1,918.6 1,740.2 178.4
Add back impairment made to disposal
group - - - - (109.1) 109.1
Adjustments for FX and averaging (10.9) (10.9) - 42.9 42.9 -
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
Net assets for ROIC 1,922.3 1,922.3 - 1,961.5 1,674.0 287.5
Reported borrowings & finance leases (1,324.1) (1,324.1) - (1,549.4) (1,549.4) -
Reported cash and cash equivalents 153.5 153.5 - 205.3 182.5 22.8
Adjustments for FX and averaging (175.9) (175.9) - 22.3 22.3 -
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
Less net debt for ROIC (1,346.5) (1,346.5) - (1,321.8) (1,344.6) 22.8
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
Invested capital for ROIC 3,268.8 3,268.8 - 3,283.3 3,018.6 264.7
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
ROIC 11.0% 11.0% - 10.1% 10.0% 10.4%
-------------------------------------- --------- ----------- ------------- --------- ----------- --------------
Alternative Performance Measures - continued
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.
2017 2016
Total Total
$m $m
========================================= ======= =======
Reported cash generated by operations
(note 8) 380.8 390.7
Less reported purchase of property,
plant and equipment (note 8) (73.4) (101.6)
Less reported purchase of intangible
assets (note 8) (11.9) (11.4)
Add Ontic licences not accounted for
under IFRS 3 (note 8) 5.0 10.6
Add reported proceeds from disposal
of property, plant and equipment (note
8) 16.8 11.1
----------------------------------------- ------- -------
Operating cash flow 317.3 299.4
----------------------------------------- ------- -------
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.
2017 2016
Total Total
% %
================= ======= =======
Cash conversion 134% 155%
----------------- ------- -------
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 8 to the
Consolidated Financial Statements and reconciled to net cash inflow
from operating activities, the most directly comparable IFRS
measure.
Net debt
Net debt consists of borrowings (both current and non-current),
less cash and cash equivalents and the fair value adjustment on the
US Private Placement loan.
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.
2017 2017 2017 2016 2016 2016
Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m
===================================== ========= =========== ============= ========= =========== =============
Reported borrowings (note 7) (1,322.8) (1,322.8) - (1,547.7) (1,547.7) -
Reported finance leases (1.3) (1.3) - (1.7) (1.7) -
Reported cash and cash equivalents 153.5 153.5 - 205.3 182.5 22.8
Fair value adjustment on USPP (note
7) 3.5 3.5 - 8.8 8.8 -
------------------------------------- --------- ----------- ------------- --------- ----------- -------------
Net debt (1,167.1) (1,167.1) - (1,335.3) (1,358.1) 22.8
------------------------------------- --------- ----------- ------------- --------- ----------- -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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