BBA Aviation operating profit flies higher

Aviation services company BBA Aviation published its interim financial report for the six months to 30 June on Tuesday, with underlying operating profit up 56% to $149.6m.

The FTSE 250 firm said the acquisition of Landmark Aviation was delivering as anticipated, with the integration proceeding well and “synergy delivery” ahead of plan.

It added that $190m of US Department of Justice-required FBO disposals were also completed during the period.

In Flight Support, which accounts for 93% of the group, the board reported “excellent” underlying operating profit growth of 84% in the enlarged Signature division, despite broadly flat markets.

The operation continued to outperform the market, with existing Signature organic revenue growth of 3.6% and underlying operating profit growth of 10.8%*

BBA had increased confidence in delivering run rate synergies of at least $35m, the board added.

In Aftermarket Services, which comprise 7% of the group, the legacy support business Ontic delivered ahead of plan and with a “strong” order book.

BBA reported a weak first half performance in ERO, however, as trading conditions remained challenging, although it made continued progress on footprint reduction programme

Statutory operating profit from continuing operations was down 8% to $62.1m.

The company’s discontinued ASIG operation was reclassified as held for sale, with a good underlying improvement.

BBA reported exceptional and other items of $347.3m, with continuing challenges in ERO leading to a non-cash accounting impairment of $185.3m.

There was also a $128.9m ASIG write-down resulting from reclassification as held for sale, and the $44.7m amortisation of acquired Landmark Aviation intangibles, in line with expectations

BBA said it had a “strong” net cash flow from operating activities of $160m and the group was de-levered to 3.2x net debt/EBITDA on a covenant basis, against the covenant of 4x.

Adjusted underlying earnings per share were up 6.4%, with the board declaring an interim dividend up 5%, reflecting its “continued confidence” in the group's future growth prospects.

“The group overall delivered a strong set of results in H1 despite broadly flat markets,” said CEO Simon Pryce.

“We are pleased with the acquisition of Landmark Aviation and the integration is ahead of plan.

“The enlarged Signature - which now represents over 90% of the group's continuing business - delivered an excellent half of outperformance with good margin drop through,” Pryce added.

He said that in Aftermarket Services, BBA’s Legacy Support business Ontic performed ahead of expectations but ERO continued to experience difficult trading conditions, although with an improving trend in the second quarter as the board continued to execute its footprint reduction programme.

“As anticipated, we saw strong cash generation and group leverage on a covenant basis is already down to 3.2x.

“With the actions that deliver the majority of the cost synergies complete as we enter H2, we are highly confident of delivering at least $35mof annualised cost savings from the Landmark Aviation acquisition.

“We also continue to see further opportunity for continued outperformance from the enlarged Signature through the delivery of its customer recognised, industry-leading services and the application of its operational excellence across a much larger global network of high quality locations,” Pryce explained.

He said Ontic has a very strong pipeline and a good order book and while the delayed recovery in legacy mid-cabin fixed wing and rotorcraft flying will continue to impact ERO, the company’s footprint reduction programme remains on track and will lead to improved financial performance.

“We remain confident in the full year outlook and anticipate good further progress in 2016, which coupled with continued, albeit modest growth in our major markets, will give us strong momentum into 2017 and beyond."