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BBA Aviation

BBA Aviation Plc Non-fuel & Ontic, delivered strong organic growth

In advance of its Annual General Meeting today, BBA Aviation Plc (LON:BBA), a market-leading provider of global aviation support and aftermarket services, today announced a trading update for the period 1 January to 30 April 2019, unless otherwise stated.

The Group’s trading performance remains in line with expectations, with revenue for the continuing Group for the period up 23.1% year-on year, reflecting organic growth along with the acquisitions of EPIC, Firstmark and Ontic licences acquired during 2018. On a like-for-like basis (constant currency, adjusting for fuel prices and before acquisitions) revenue was up 1.1%.

Signature

In Signature (Signature FBO, EPIC and TECHNICAir), revenues for the period to end of April grew 22.7% and on a like-for-like basis (constant currency, adjusting for fuel prices and acquisitions) were up 0.4% against a strong comparative in 2018.

For the three months to 31 March 2019 US B&GA flight movements grew 0.3% and like-for-like revenue growth in our Signature FBO business was 1.2%. The 90 basis points of market outperformance reflects a stable level of outperformance consistent with the fourth quarter of 2018. In the year to date we have seen similar trends in segmental activity with growth within the fractional and owner-operator segments being offset by a continued divergence of the more discretionary charter segment. Overall, the US B&GA market performed as we expected in the first quarter, with movements consistent with our guidance for a flat full year 2019 market backdrop.

2019 will see a full year contribution from EPIC which has extended and fortified our network and has performed in line with our expectations in the period.

We continue to progress our strategic initiatives in Signature to deliver our medium-term B&GA market outperformance target of 250 basis points, as set out at the Capital Markets Days, and remain confident with regard to the opportunities presented.

Ontic

In Ontic, revenue increased 33.6% and on a like-for-like basis (adjusting for constant currency and acquisitions) delivered strong organic growth of 14.4% in the first four months of the financial year. The integration of the Firstmark business within Ontic is proceeding well and to plan and it has contributed in line with our expectations in the period. Ontic continues to have a strong order book and to evaluate an attractive pipeline of future licence opportunities; we remain on track to deliver the $100m EBITDA target by the end of 2021.

Discontinued operations

Our ERO business has continued to perform in line with our expectations during the period with revenue growth of 10.7% compared to the prior year. On a like-for-like basis (adjusting for constant currency) revenue was up 11.8%. The ERO disposal process is ongoing and we expect to update the market in due course.

Mark Johnstone, BBA Aviation CEO commented “We are pleased with the initial progress made as we advance our strategic growth initiatives outlined at the Capital Markets Days in both Signature, particularly in non-fuel and in Ontic, where we delivered strong organic growth. The continuing Group is focused on high ROIC and strongly cash generative market-leading businesses and the outlook for the full year remains unchanged.”

IFRS 16

The adoption of IFRS 16, effective 1 January 2019, has no impact on the economic prospects, strategy or cash generative nature of our businesses.

The long term FBO leases, to which the new accounting standard applies, are granted by an airport to Signature and convey a long term right to operate at the airfield from which Signature generates long term cashflows.

Our interim results, to be published on 5 August, will be reported on an IFRS 16 basis and as we have previously stated IFRS 16 will materially impact several key financial metrics with regard to reported performance, financial position, financing costs and associated financial leverage. Although we will not restate the comparative disclosures for the impact of IFRS 16, to aid comparability we will reconcile the IFRS 16 disclosure back to the historical accounting treatment of leases which now becomes an Adjusted Performance Measure (non-GAAP metric). This will ensure consistency and comparability while also clearly disclosing the impact of the new standard.

We have reproduced, and we reaffirm below the guidance previously provided on the impact of IFRS 16 for FY19, based on the FY18 lease portfolio at the date of adoption (1 January 2019).

Metric

Increase/decrease

No impact

Free cashflow

FY 2019

Revenue

FY 2019

 –

Metric

Increase/decrease

Impact

Operating profit

FY 2019

Increase

c12%

EBITDA

FY 2019

Increase

c30%

Interest

FY 2019

Increase

c100%

Profit before tax

FY 2019

Decrease

c10%

Adjusted EPS

FY 2019

Decrease

c10%

Total assets

1 Jan 2019

Increase

c25%

Total liabilities

1 Jan 2019

Increase

c50%

Operating cashflow

FY 2019

Increase

c35%

Net debt

1 Jan 2019

Increase

c85%

Debt covenants are unchanged and will continue to be tested on a pre-IFRS16 basis.

Notes:

The Group will publish its interim results for the half year ended 30 June 2019 on 5 August 2019.