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RNS
BBA Aviation PLC  -  BBA   

Half-year Report

Released 07:00 01-Aug-2018

RNS Number : 3763W
BBA Aviation PLC
01 August 2018
 

 

 

 

 

 

 

 

BBA Aviation plc

 

2018 Interim Financial Report

 

Unaudited results for the half year ended

30 June 2018

 

 

 

 

 

For further information please contact:

David Crook, Group Finance Director                                                   (020) 7514 3999

Kate Moy, Investor Relations                                                                            

BBA AVIATION PLC

 

David Allchurch                                                                                     (020) 7353 4200

TULCHAN COMMUNICATIONS

 

 

A video with Mark Johnstone, Group Chief Executive, and David Crook, Group Finance Director, is now available on www.bbaaviation.com

 

A live audio webcast of the analyst presentation will be available from 08:30 today on www.bbaaviation.com
 

INTERIM FINANCIAL REPORT FOR PERIOD ENDED 30 JUNE 2018

 

 

GROUP

 

       Underlying results1

Statutory results

 

H1 2018

H1 2017 Restated2

 

H1 2018

H1 2017 Restated2

 

$m

Continuing

Total

(including discontinued operations)

Continuing

Total (including discontinued operations)

% Change3

Continuing

Total

(including discontinued operations)

Continuing

Total (including discontinued operations)

 

% Change3

Revenue

1,024.3

1,281.9

898.6

1,183.7

8%

1,024.3

1,281.9

898.6

1,183.7

8%

EBITDA

204.9

222.0

204.6

217.8

2%

197.2

213.2

203.0

212.5

- %

Operating profit

167.1

180.5

165.3

174.7

3%

115.9

128.2

117.0

122.7

4%

Profit before tax

140.2

153.1

134.1

143.3

7%

76.2

83.0

85.8

84.7

(2)%

Profit after tax

110.7

121.0

111.0

117.1

3%

61.4

66.7

80.7

52.5

27%

Basic adjusted earnings per share4

10.7¢

11.7¢

10.8¢

11.4¢

3%

6.0¢

6.5¢

7.8¢

5.1¢

27%

Underlying and Statutory

 

 

 

 

 

 

 

 

 

Return on invested capital5

-

11.3%

-

11.0%

30bps

 

 

 

 

 

Free cash flow

-

114.5

-

56.6

102%

 

 

 

 

 

Net debt5

-

(1,197.3)

-

(1,167.1)

-

 

 

 

 

 

Dividend per share

-

4.00¢

-

3.81¢

5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Underlying results represent alternative performance measures, see note 17 outlining all such measures

2. Restated following the presentation of ERO (excluding the Middle East) as a discontinued operation

3. % change based on total (including discontinued operations)

4. Statutory measure is basic earnings per share

5. 2017 return on invested capital and net debt are shown for the full year ended 31 December 2017, see note 17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                         

 

 

Highlights

 

·      Total underlying operating profit up 3.3% to $180.5 million; Signature network outperforming a soft market

 

·      Continuing operations: 

Flight Support (87% of continuing Group underlying operating profit) 

§  Organic revenue up 5.0% with network agreements contributing to outperformance

§  US B&GA market softer than the expected 3% growth, with Q1: 2.6% and April & May average of 1.9%

§  Operating profit up 1.8% with opex investment in technology on track for deployment in 2019

 

Aftermarket Services (13% of continuing Group underlying operating profit) 

§  Operating profit growth of 8.6% to $23.9m, driven by Ontic licence acquisitions

§  Licence acquisitions and FX more than offsetting prior year cyclical military orders

 

 

·     Discontinued operations

Engine Repair and Overhaul excluding the Middle East (ERO) delivered further improvement in underlying operating profit performance of $3.8 million representing 39.6% growth over H1 2017

 

 

·      Statutory total operating profit increased by 4% to £128.2 million (H1 2017: $122.7 million)

 

·      Continuing statutory profit before tax was $76.2 million versus $85.8 million for the first half of 2017

 

·      Strong free cash flow of $114.5 million (H1 2017: $56.6 million), leverage at 2.6x net debt/EBITDA

 

·      Group ROIC increased by 30 basis points to 11.3% (Dec 2017: 11.0%)

 

·      Underlying total adjusted basic EPS increased by 3% to 11.7¢. Total basic EPS increased by 27% to 6.5¢

 

·          Interim dividend increased by 5% to 4.00 cents reflecting continued confidence in the Group's future growth prospects

 

 

 

 

 

 

Mark Johnstone, BBA Aviation Group Chief Executive, commented:

 

"We are pleased with our operational achievements in the first half of 2018 and were delighted to announce the $88m acquisition of EPIC. Against the background of a softer US B&GA market that grew 2.3% during the first five months of the year, we delivered continued market outperformance and made progress in driving the benefits of Signature's unique global network of FBOs. We have invested in technology to underpin the future growth and longer-term market outperformance and capture the potential we see to expand the offering of non-fuel services, improve yield management and further leverage our market leading network and service quality.

 

In Aftermarket Services, Ontic had a solid first half against a strong prior year comparative and is expected to perform in line with expectations for the full year. It has a growing portfolio of IP protected licences and continues to have a strong pipeline of growth opportunities as we look to leverage data analytics and expand on more platforms.

 

In summary, the continuing Group is focused on high ROIC and strongly cash generative market leading businesses and has a good pipeline of investment opportunities. The Board is confident of modest growth in 2018, through continued outperformance against a softer US B&GA market backdrop."
 

INTERIM FINANCIAL REPORT 2018

 

Overview

 

BBA Aviation performed well in the first half of 2018 and made further progress with the implementation of its strategy.

 

Flight Support (Signature) delivered underlying operating profit growth of 1.8% against US B&GA movements that grew 2.3% during the first five months of the year. With the first full six months contribution from the network agreements, Signature is making encouraging progress despite the softer than expected US B&GA market. Ontic continues to perform well, though as previously noted its first half performance has been impacted by phasing of certain deliveries.

 

Continuing Group revenue increased by 14.0% to $1,024.3 million (H1 2017: $898.6 million) including a $5.0m contribution from Ontic licence acquisitions. Signature revenue increased 15.4%, reflecting organic growth of 5.0% and the positive impact of higher fuel prices ($70.8 million) and foreign exchange movements ($8.3 million), which increased revenue by $79.1 million. Continuing Aftermarket Services revenue increased by 2.3% with the contribution from the 2017 and 2018 acquisitions in Ontic broadly offsetting the decline in cyclical military orders.

 

Continuing Group underlying operating profit was $167.1 million (H1 2017: $165.3 million). There was a good operating performance in Signature, with network agreements delivering in line with expectations while drop through was impacted by weaker than expected US market growth and the impact of growth investments being made. Underlying continuing operating profit at Aftermarket Services of $23.9 million (H1 2017: $22.0 million) includes a $2.7 million contribution from Ontic acquisitions and now accounts for 13% of the continuing Group.

 

Continuing Group underlying operating profit margin decreased to 16.3% (H1 2017 at H1 2018 fuel prices: 17.1%) reflecting the impact of investments being made in Signature.

 

We have now completed the strategic review of our Engine Repair and Overhaul (ERO) business and reclassified the business as held for sale and reported it as a discontinued operation. We now consider the sale of the business to be highly probable, albeit there is no certainty that an acceptable transaction will result. We anticipate making a further announcement on ERO before the end of the year. 

 

Net interest for the total Group reduced by $4.0 million to $27.4 million (H1 2017: $31.4 million), due to one-time gain from hedging contracts closed out as part of the refinancing. Net debt increased to $1,197.3 million (FY 2017: $1,167.1 million). Net debt to EBITDA was flat at 2.6x on a covenant basis (FY 2017: 2.6x) and 2.6x on a reported basis (FY 2017: 2.6x). Interest cover on a covenant basis increased to 9.4x for the 12 months to 30 June 2018 (FY 2017: 8.4x).

 

Continuing underlying profit before tax increased to $140.2 million (H1 2017: $134.1 million).

 

The Group's underlying tax rate for continuing operations was 21.0% (H1 2017: 17.2%). Adjusted earnings per share for continuing operations was down 0.9% to 10.7¢ (H1 2017: 10.8¢).

 

Exceptional and other items after tax, for continuing and discontinued operations, totalled $54.3 million. Key components of this for continuing operations are the non-cash amortisation of acquired intangibles ($43.5 million), the impairment of the Sloulin Field FBO ($12.8 million), restructuring expenses ($7.7 million) and a tax credit ($14.7 million). Exceptional and other items on discontinued operations relate to the costs of restructuring and completing the strategic review of the ERO business.

 

Continuing statutory profit before tax was $76.2 million versus $85.8 million for the first half of 2017. The reduction arises principally from the higher level of exceptional and other items charged during the first six months of 2018.

 

Free cash inflow was $57.9 million higher at $114.5 million (H1 2017: $56.6 million). There was a $23.7 million outflow of working capital in the first half of 2018 (H1 2017: $65.1 million outflow, FY 2017: $46.3 million outflow).  The outflow during the first half was largely due to the availability of parts from OEMs in the ERO business which impacted timing of completion on engine overhaul events.

 

Gross capital expenditure amounted to $44.3 million (H1 2017: $38.2 million). Principal capital expenditure items include the investment in Signature's FBO development at Nashville and the investment in the sports terminal at our Miami FBO.

 

Cash flows on exceptional and other items are largely a result of restructuring expenses.

 

The Group made $2.2 million of pension scheme payments (H1 2017: $2.1 million).

 

The Group's tax payments during the period were $10.2 million (H1 2017: $18.8 million) and net interest payments were $21.5 million (H1 2017: $28.8 million). The dividend payment was $99.3 million (H1 2017: $91.5 million).

 

Total spend on acquisitions and licences completed during the period was $27.7 million (H1 2017: $61.3 million), which included Ontic licence acquisitions from Honeywell and UTAS along with the acquisition of a minority stake in Alyssum. H1 2017 included proceeds from disposals of $180.4 million related to the disposal of ASIG, net of costs.

 

Return on Invested Capital (ROIC) increased to 11.3% (FY 2017: 11.0%).

 

 

 

Business Review - Continuing Operations

 

Flight Support (87% of continuing operations' underlying operating profit)

 

The Flight Support division ("Signature") provides specialist on-airport services including refuelling and ground handling to the business & general aviation (B&GA) market.

 

$m

H1 2018

H1 2017

% Change

Revenue

926.3

802.8

15.4 %

Underlying operating profit

163.7

160.8

1.8 %

Underlying operating margin

17.7%

20.0%

(230) pts

Constant fuel margin1

17.7%

18.4%

(70) pts

Statutory operating profit

126.0

119.7

5.3 %

Operating cash flow

197.8

154.0

28.4%

Divisional return on invested capital

12.2%

12.2%*

- pts

1 H1 2017 underlying operating margin adjusted for constant fuel prices (unadjusted H1 2017 underlying operating margin: 20.0%)

*Return on invested capital for full year 2017

 

Revenue at Signature increased by 15.4% to $926.3 million (H1 2017: $802.8 million). This included the positive impact of higher fuel prices and foreign exchange movements, which increased revenue by $79.1 million. Signature's organic revenue, which excludes the impact of higher fuel prices and foreign exchange, increased by 5.0%. This was against a backdrop of US B&GA movements (source: FAA) up 2.3% for the five months to May. Whilst FAA market data is not available for June, a useful alternative reference point is the report by Argus TRAQPak which showed a 0.1% contraction in flight activity in June. European B&GA movements were up 4.5% in H1 2018.

 

Underlying operating profit at Signature increased by 1.8% to $163.7 million (H1 2017: $160.8 million) and on an organic basis, which adjusts for FX of $0.6 million, underlying operating profit increased by 1.4%. The Group remains confident in Signature's ability to continue to deliver significant value creation across the enlarged network, supported by the investments we are making during 2018.

 

Underlying operating margin was lower at 17.7% (H1 2017: 20.0%) due primarily to the increase in fuel prices. After adjusting H1 2017 underlying operating margin for 2018 fuel prices, Signature's underlying operating margin for H1 2017 was 18.4%. This represents a margin reduction of 70 basis points.

 

Statutory operating profit of $126.0 million has increased by 5.3% (H1 2017: $119.7 million). This increase is a result of organic growth and lower charges for exceptional and other items.

 

Operating cash flow for Signature improved to $197.8 million (H1 2017: $154.0 million), principally due to improved working capital performance. Return on invested capital remained consistent at 12.2% (FY 2017: 12.2%).

 

We continue to invest in our Signature network, including recent investments in new technology to enhance our fuel and non-fuel revenue management capabilities. As previously noted, we have been investing in enhanced EPoS and revenue management tools. The Group is confident that the outperformance of the Signature network against the US B&GA market demonstrates the ability of our unrivalled network to deliver value.

 

Signature has recently secured a significant lease term extension with a new 20-year lease (with a possible further five-year extension) at its sole source FBO at Hartsfield Jackson Atlanta International Airport. Here, at what is the world's busiest hub airport, we will invest in a new FBO facility and will launch our Signature Elite™ service (private transfers to/from commercial flights via Signature's FBO facilities).

 

In May 2018 we acquired EPIC Aviation LLC, doing business as EPIC Fuels (EPIC), a leading fuel and fuel related services supplier to an extensive FBO network for a cash consideration of $88.1m. This deal completed on 1 July 2018 following regulatory approvals.

 

EPIC provides fuel and fuel related services at 208 privately owned independent FBO locations, 189 of these locations are branded EPIC and 19 are branded UVAir. The addition of EPIC's 208 FBO locations is complementary to our existing Signature Select® branded locations, establishing a non-owned, network to operate alongside our market-leading owned FBO network.

 

EPIC is our existing Signature fuel card partner and the acquisition allows Signature to have full end-to-end management of the existing SFS EPIC fuel card programme, associated transaction processing and data capture as a platform for an enhanced service offering across our entire network. The Group has also acquired EPIC's proprietary QTPod technology for self-fuelling AvGas services. QTPod has the potential to expand its footprint in the aviation industry with a new proprietary and cloud based self-serve fuelling terminal.

 

EPIC is expected to contribute revenue of around $400m in the first full year of ownership. The $88.1m consideration represents an expected year one EBITDA multiple of 11.7x, pre-acquisition related expenses of around $1.2m and EPIC is expected to achieve BBA's ROIC target threshold of 12% by year three.

 

There are 199 locations in Signature's global network, including 20 Signature Select® franchise locations, where we have recently added Gary International Airport in Chicago. Following the acquisition of EPIC we now have 228 privately owned, independent FBOs and 179 owned FBOs. This creates a total network of over 400 FBO locations significantly extending Signature's network relevance and the range of services it can offer.

 

 

Aftermarket Services (13% of continuing operations' underlying operating profit)

 

The Aftermarket Services division is focused on the support of maturing aerospace platforms through Ontic, the Group's Legacy Support business.

 

$m

H1 2018

H1 2017

% Change

Revenue

98.0

95.8

 2.3 %

Underlying operating profit

23.9

22.0

8.6 %

Underlying operating margin

24.4%

23.0%

140 bps

Statutory operating profit

11.2

16.4

(31.7) %

Operating cash flow

18.4

12.6

46.0%

Divisional ROIC

14.6%

15.0%

 (40) pts

*Return on invested capital for full year 2017

** ERO (Middle East) is included in continuing Aftermarket Services while the business is being closed (Revenue $2.7m, operating loss $0.6m, H1 2017: Revenue $1.6m and operating loss of $2.2m)

 

In Aftermarket Services, revenue increased by 2.3% to $98.0 million (H1 2017: $95.8 million). On an organic basis, which adjusts for FX ($3.6 million) and acquisitions ($5.0 million), revenue declined by 6.4% due to the previously highlighted prior year non-recurring cyclical military orders and phasing of deliveries.

 

Underlying operating profit of $23.9 million increased by 8.6% (H1 2017: $22.0 million) driven by a contribution from Ontic acquisitions of $2.7m. As previously highlighted, the year on year performance at Ontic has been impacted by the phasing of its revenues, against a strong prior year comparative, but is expected to perform in line with expectations for the full year.  On an organic basis, excluding FX and acquisitions, Aftermarket Services underlying operating profit decreased 9.0%. Underlying operating margins improved to 24.4% (H1 2017: 23.0%). The performance of Aftermarket Services includes a $0.6 million operating loss (H1 2017: $2.2 million loss) in our ERO Middle East business, which is not included as part of the discontinued operations and will be closed over the next few months.

 

Statutory operating profit of $11.2 million has decreased by $5.2 million (H1 2017: $16.4 million), principally as a result of closure costs relating to our ERO facility in the Middle East.

 

There was an operating cash inflow for the division of $18.4 million (H1 2017: $12.6 million inflow) driven by working capital performance in Ontic and narrowing of losses in the Middle East. Return on invested capital was broadly flat at 14.6 % (FY 2017: 15.0%).

 

Early in 2018 Ontic signed a first product licence with Racal Acoustics, part of Esterline Corporation, for various military and civil avionics products including cockpit communication control systems. We have also recently signed a new licensing agreement with Honeywell for cockpit LCD displays on multiple commercial, military fixed-wing and rotorcraft platforms. We are also pleased to sign a first product licence with Engine Control Services (part of United Technologies Aerospace Systems) for the manufacturing and aftermarket support for military fuel control products. Our fourth licence in the first half was with Ultra Electronics bringing our total cash spend on licence acquisitions to $22.5 million (H1 2017: $61.3 million, predominantly relating to the GE Aviation avionics portfolio).

 

Ontic continues to assess a strong pipeline of opportunities in relation to new products and licence adoptions and possible M&A. 

 

 

Central costs

 

Underlying central costs have increased during the first half of 2018 by $3.0 million to $20.5 million (H1 2017: $17.5 million). This primarily reflects additional one-time costs incurred in our captive insurance company for the damage to our US and Caribbean facilities in the 2017 hurricanes, increased share based payment charges and costs associated with the CEO transition.

 

Central costs now also include $5.7 million of costs to support ERO (H1 2017: $5.6 million) which are not considered as discontinued operations.

 

 

Business Review - Discontinued Operations

 

At the end of May 2018 management committed to a plan to sell substantially all our Engine Repair and Overhaul business and as such at that point the relevant assets and liabilities were classified as held for sale. At that time, as a major line of the Group's business, the ERO operations were also classified as a discontinued operation. 

 

ERO's revenue increased by $10.7 million to $257.6 million (H1 2017: $246.9 million). In stable markets, ERO's underlying operating profit was up 39.6% to $13.4 million (H1 2017: $9.6 million). ERO's profit improvement also includes the benefit from a suspension of depreciation and amortisation of $0.7 million for the month of June 2018, the required accounting treatment while the asset is held for sale.

 

Also shown in discontinued operations for the six months ended 30 June 2017 are revenues of $38.2m and an underlying operating loss of $0.2 million for ASIG, sold to John Menzies plc on 31 January 2017, which generated proceeds of $180.4 million, net of costs.

 

 

Other Financial Information & Refinancing

 

Net debt increased by $30.2 million to $1,197.3 million (FY 2017: $1,167.1 million). At 30 June 2018 the Group had total borrowings of $1,338.4 million (FY 2017 $1,322.8 million), obligations under finance leases of $1.3 million (FY 2017 $1.3 million) and cash and cash equivalents of $147.6 million for continuing operations (FY 2017: $152.6 million).

 

Net debt to EBITDA was stable at 2.6x on a covenant basis (FY 2017: 2.6x) and 2.6x on a reported basis (FY 2017: 2.6x). Interest cover on a covenant basis increased to 9.4x for the 12 months to 30 June 2017 (FY 2017: 8.4x).

 

Operating cashflow was $42.2m higher at $144.5 million (H1 2017 $102.3 million). This was driven by a reduced outflow of working capital in the first half of 2018 of $23.7 million (H1 2017: $65.1 million outflow, FY 2017: $46.3 million outflow).  The continuing Group's strong working capital performance was offset by the discontinued ERO business where the availability of parts from OEMs impacted timing of completion on engine overhaul events. Gross capital expenditure amounted to $44.3 million (H1 2017: $38.2 million), including IT spend and investments on our FBOs in Nashville and Miami.

 

Income taxes paid was down $8.6 million to $10.2 million (H1 2017: $18.8 million) due largely to non-repeat of tax paid in the prior year on ASIG disposal and net interest payments were down $7.2 million to $21.5 million (H1 2017: $28.7 million). As a result, free cash inflow was $57.9 million higher at $114.5 million (H1 2017: $56.6 million).

 

As recently announced, the Group has refinanced its $650 million unsecured multicurrency revolving credit facility (RCF) which was due to mature in April 2019, with a new facility which will expire in March 2023. The new RCF has been agreed predominantly with the Group's existing lenders with an overall weighted average interest cost in line with the previous facility. We have also recently issued our inaugural $500 million senior unsecured notes due 2026 at 5.375%. The proceeds from the issuance of $500 million senior unsecured notes were used to repay the $253 million Facility B of our acquisition financing and $120 million of US private placement notes which matured in May 2018. This gives the Group a diversified debt structure with an extended maturity profile to align better with the long-term nature of the assets being financed and to support future growth.

 

 

Pensions

 

The Group's net defined benefit pension and other post-retirement benefits liabilities reduced by $27.2 million during the first half of 2018 from $71.7 million at 31 December 2017 to $44.5 million at 30 June 2018. The reduction in the net deficit since 31 December 2017 reflects contributions and the favourable impact of market based financial assumptions, slightly offset by asset performance being below expectations and liability experience losses.

 

Dividend

 

The Board is declaring an increased interim dividend of 4.00¢ (H1 2017: 3.81¢) up 5% reflecting the Board's progressive dividend policy and its continued confidence in the Group's future growth prospects.

 

A dividend reinvestment plan is in operation. Those shareholders who have not elected to participate in this plan, and who would like to participate, please register via the share portal www.signalshares.com.  The deadline for elections is 5:30pm on 8 October 2018.

 

 

Board Changes

 

As previously announced, Mark Johnstone was appointed as Group Chief Executive with effect from 1 April 2018. Wayne Edmunds stepped down from his role as Interim Group Chief Executive on 31 March 2018 and remains on the Board as a non-executive director.

 

 

Outlook

 

Overall, we are pleased with the progress we have made in the first half of 2018. Our investments in technology will underpin the future growth and longer-term market outperformance of our business. 

 

The continuing Group is focused on high ROIC and strongly cash generative businesses. The Board is confident of modest growth in 2018, through continued outperformance against a soft US B&GA market backdrop and Ontic continues to have a strong pipeline of growth opportunities. We will continue to invest in our Signature network and remain focused on delivering continued US B&GA market outperformance in 2019 and beyond.

 

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 Directors confirm that to the best of their knowledge:

 

a)    the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

b)    the interim financial report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and,

c)    the interim financial report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

Signed on behalf of the Board,

 

 

 

 

Mark Johnstone                                                                                                                 David Crook        

Group Chief Executive Officer                                                                                           Group Finance Director

 

31 July 2018                                                                                                                         31 July 2018        

 

 

 

This interim financial report contains forward-looking statements including, without limitation, statements relating to: future demand and markets of the Group's products and services; research and development relating to new products and services; liquidity and capital; and implementation of restructuring plans and efficiencies. These forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Accordingly, actual results may differ materially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changes in interest and exchange rates, in tax rates or tax legislation, commodity prices and other economic conditions; negotiations with customers relating to renewal of contracts and future volumes and prices; events affecting international security, including global health issues and terrorism; changes in regulatory environment; the introduction or variation of tariffs or duties; and the outcome of litigation. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. This interim financial report has been drawn up and presented in accordance with and in reliance on applicable English company law and the liabilities of the directors in connection with this report shall be subject to the limitations and restrictions provided by such law.

 

 

This report is available in electronic format from the Company's website www.bbaaviation.com

 

 

 

Unaudited condensed consolidated income statement

 

 

 

 

Six months ended 30 June 2018

 

 

 

Restated

Six months ended 30 June 2017

 

 

 

Restated

Year ended 31 December 2017

 

 

 

Underlying1

Exceptional and other Items

Total

Underlying1

Exceptional and other Items

Total

Underlying1

Exceptional and other Items

Total

 

 

 

Note

$m

$m

$m

$m

$m

$m

$m

$m

$m

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

Revenue

2

1,024.3

-

1,024.3

898.6

-

898.6

1,857.3

-

1,857.3

 

Cost of sales

 

(770.2)

-

(770.2)

(662.4)

-

(662.4)

(1,369.5)

-

(1,369.5)

 

Gross profit

 

254.1

-

254.1

236.2

-

236.2

487.8

-

487.8

 

Distribution costs

 

(5.1)

-

(5.1)

(6.0)

-

(6.0)

(12.1)

-

(12.1)

 

Administrative expenses

3

(84.1)

(43.5)

(127.6)

(68.7)

(46.7)

(115.4)

(149.6)

(93.8)

(243.4)

 

Other operating income

 

1.3

-

1.3

2.6

-

2.6

8.3

-

8.3

 

Share of profit of associates and joint ventures

 

       

1.7

-

1.7

1.7

-

1.7

3.4

-

3.4

 

Other operating expenses

3

(0.8)

-

(0.8)

(0.5)

-

(0.5)

(1.3)

(1.2)

(2.5)

 

Restructuring costs

3

-

(7.7)

(7.7)

-

(1.6)

(1.6)

-

(22.4)

(22.4)

 

Operating profit/(loss)

2, 3

167.1

(51.2)

115.9

165.3

(48.3)

117.0

336.5

(117.4)

219.1

 

Impairment of assets

 

-

(12.8)

(12.8)

-

-

-

-

-

-

 

Investment income

 

0.3

-

0.3

1.0

-

1.0

3.2

-

3.2

 

Finance costs

 

(27.2)

-

(27.2)

(32.2)

-

(32.2)

(64.7)

-

(64.7)

 

Profit/(loss) before tax

 

140.2

(64.0)

76.2

134.1

(48.3)

85.8

275.0

(117.4)

157.6

 

Tax (expense)/credit

3, 4

(29.5)

14.7

(14.8)

(23.1)

18.0

(5.1)

(51.3)

12.2

(39.1)

 

Profit/(loss) from continuing operations

 

110.7

(49.3)

61.4

111.0

(30.3)

80.7

223.7

(105.2)

118.5

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

Profit/(loss) from ERO discontinued operations, net of tax

3, 14

10.3

(5.0)

5.3

6.3

(2.4)

3.9

22.6

0.7

23.3

 

Profit/(loss) from ASIG discontinued operations, net of tax

3, 14

-

-

-

(0.2)

(31.9)

(32.1)

-

(22.5)

(22.5)

 

Profit/(loss) for the period

 

121.0

(54.3)

66.7

117.1

(64.6)

52.5

246.3

(127.0)

119.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

Equity holders of BBA Aviation plc

 

121.0

(54.3)

66.7

117.0

(64.6)

52.4

246.4

(127.0)

119.4

 

Non-controlling interests

 

-

-

-

0.1

-

0.1

(0.1)

-

(0.1)

 

Profit/(loss) for the period

 

121.0

(54.3)

66.7

117.1

(64.6)

52.5

246.3

(127.0)

119.3

 

 

 

 

 

Six months ended 30 June 2018

 

 

 

Six months ended 30 June 2017

 

 

 

Year ended 31 December 2017

 

Earnings/(loss) per share

Note

Adjusted1

 

Unadjusted

Adjusted1

 

Unadjusted

Adjusted1

 

Unadjusted

 

Total group

 

 

 

 

 

 

 

 

 

 

 

Basic

5

11.7¢

 

6.5¢

11.4¢

 

5.1¢

24.0¢

 

11.6¢

 

Diluted

5

11.6¢

 

6.4¢

11.3¢

 

5.0¢

23.7¢

 

11.5¢

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

Basic

5

10.7¢

 

6.0¢

10.8¢

 

7.8¢

21.8¢

 

11.5¢

 

Diluted

5

10.6¢

 

5.9¢

10.7¢

 

7.8¢

21.5¢

 

11.4¢

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

Basic

14

1.0¢

 

0.5¢

0.6¢

 

(2.7)¢

2.2¢

 

0.1¢

 

Diluted

14

1.0¢

 

0.5¢

0.6¢

 

(2.8)¢

2.2¢

 

0.1¢

 

                                                 

1 Underlying results and adjusted earnings per share are stated before exceptional and other items. Exceptional and other items are disclosed in note 3.

All alternative performance measures are reconciled to IFRS measures and are explained in note 17.

The Group has presented a discontinued operation in the current year, and accordingly the prior period has been restated as required by IFRS, see note 14. In addition, in the comparative period, the Group presented a separate discontinued operation.
 

Unaudited condensed consolidated statement of comprehensive income

 

Six months ended 30 June 2018


Six months ended 30 June 2017


Year ended 31 December 2017

 

$m

$m

$m

Profit for the period

66.7

52.5

119.3

 

 

 

 

Other comprehensive income/(loss)

 

 

 

Items that will not be reclassified subsequently to profit or loss

 

 

 

Actuarial gains on defined benefit pension schemes

25.2

4.5

11.2

Tax charge relating to components of other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss

(5.4)

(0.9)

(1.1)

 

19.8

3.6

10.1

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

Exchange difference on translation of foreign operations

(24.4)

(11.5)

(6.8)

Recycling of translational exchange differences accumulated in equity upon disposal of subsidiary

-

6.4

6.4

Fair value movements in assets classified as financial instruments through other comprehensive income

-

-

(4.4)

Fair value movements in foreign exchange cash flow hedges

(3.8)

7.0

10.1

Transfer to profit or loss from other comprehensive income on foreign exchange cash flow hedges

0.9

(1.9)

(2.2)

Fair value movement in interest rate cash flow hedges

(4.1)

(1.9)

1.7

Transfer to profit or loss from other comprehensive income on interest rate cash flow hedges

4.9

2.3

4.0

Tax relating to components of other comprehensive income that may be subsequently reclassified to profit or loss

0.4

(1.1)

(4.3)

 

(26.1)

(0.7)

4.5

 

 

 

 

Other comprehensive (loss)/income for the period

(6.3)

2.9

14.6

 

 

 

 

Total comprehensive income for the period

60.4

55.4

133.9

 

 

 

 

Attributable to:

 

 

 

Equity holders of BBA Aviation plc

60.4

55.3

134.0

Non-controlling interests

-

0.1

(0.1)

 

60.4

55.4

133.9

 

 

 

Unaudited condensed consolidated balance sheet                                                                                   

 

 

 

As at

30 June 2018

As at

30 June 2017


As at

31 December 2017

 

Note

 

$m

$m

$m

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill

 

 

1,120.6

1,118.3

1,126.6

Other intangible assets

 

 

1,263.2

1,339.8

1,311.3

Property, plant and equipment

 

 

779.7

867.1

845.5

Interests in associates and joint ventures

 

 

41.4

40.4

41.4

Trade and other receivables

 

 

18.0

19.9

20.1

Deferred tax asset

 

 

-

0.7

0.1

 

 

 

3,222.9

3,386.2

3,345.0

Current assets

 

 

 

 

 

Inventories

 

 

110.7

243.3

249.9

Trade and other receivables

 

 

208.2

289.4

321.4

Cash and cash equivalents

7

 

147.6

152.6

153.5

Tax recoverable

 

 

0.3

1.1

0.7

Assets held for sale                                                                

14

 

369.0

-

-

 

 

 

835.8

686.4

725.5

Total assets

2

 

4,058.7

4,072.6

4,070.5

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

 

(415.4)

(451.8)

(502.1)

Tax liabilities

 

 

(38.5)

(63.1)

(31.9)

Obligations under finance leases

 

 

(0.2)

(0.2)

(0.2)

Borrowings

7

 

(0.7)

(124.4)

(124.2)

Provisions

 

 

(27.9)

(26.1)

(32.2)

Liabilities held for sale

14

 

(109.5)

-

-

 

 

 

(592.2)

(665.6)

(690.6)

Net current assets

 

 

243.6

20.8

34.9

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings                                                                        

7

 

(1,337.7)

(1,291.7)

(1,198.6)

Trade and other payables due after one year

 

 

(7.8)

(3.1)

(0.9)

Pensions and other post-retirement benefits   

13

 

(44.5)

(80.1)

(71.7)

Deferred tax liabilities

 

 

(141.8)

(108.2)

(137.8)

Obligations under finance leases

 

 

(1.1)

(1.3)

(1.1)

Provisions

 

 

(38.4)

(38.0)

(36.6)

 

 

 

(1,571.3)

(1,522.4)

(1,446.7)

Total liabilities

2

 

(2,163.5)

(2,188.0)

(2,137.3)

Net assets

 

 

1,895.2

1,884.6

1,933.2

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

15

 

509.3

508.8

509.0

Share premium account

 

 

1,594.5

1,594.5

1,594.5

Other reserve

 

 

(5.4)

0.3

(5.4)

Treasury reserve

 

 

(95.2)

(91.7)

(92.8)

Capital reserve

 

 

53.6

47.1

50.4

Hedging and translation reserves

 

 

(100.4)

(87.9)

(73.9)

Retained earnings

 

 

(62.9)

(88.2)

(50.1)

Equity attributable to equity holders of BBA Aviation plc

 

 

1,893.5

1,882.9

1,931.7

Non-controlling interest

 

 

1.7

1.7

1.5

Total equity

 

 

1,895.2

1,884.6

1,933.2

               
 

 

Unaudited condensed consolidated cash flow statement

 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended    31 December 2017

 

Note

$m

$m

$m

Operating activities

 

 

 

 

Net cash flow from operating activities

9

177.1

121.4

339.0

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

0.3

0.5

3.3

Dividends received from associates

 

1.7

1.9

2.4

Purchase of property, plant and equipment

 

(40.1)

(35.9)

(73.4)

Purchase of intangible assets

 

(4.2)

(2.3)

(11.9)

Proceeds from disposal of property, plant and equipment

 

0.3

0.3

16.8

Acquisition of businesses, net of cash/(debt) acquired

10

(21.3)

(61.3)

(75.7)

Investment in joint ventures and associates

 

-

(0.5)

(0.3)

Investment in assets classified as financial instruments measured through other comprehensive income (FVTOCI)

 

(5.2)

-

-

Proceeds from disposal of subsidiaries and associates, net of cash/(debt) disposed

11

-

180.4

170.5

Net cash (outflow)/inflow from investing activities

 

(68.5)

83.1

31.7

 

 

 

 

 

Financing activities

 

 

 

 

Interest paid

 

(21.8)

(29.2)

(60.5)

Interest element of finance leases paid

 

-

(0.1)

(0.1)

Dividends paid

6

(99.3)

(91.5)

(130.7)

Losses from realised foreign exchange contracts

 

(2.7)

(5.0)

(15.0)

Proceeds from issue of ordinary shares net of issue costs

 

0.3

0.1

0.3

(Purchase)/sale of own shares ††

 

(5.4)

(2.1)

0.3

Increase/(decrease) in loans

 

26.8

(134.0)

(222.6)

Decrease in finance leases

 

-

(0.2)

(0.4)

(Decrease)/increase in overdrafts

 

(3.3)

2.5

3.0

Net cash outflow from financing activities

 

(105.4)

(259.5)

(425.7)

 

 

 

 

 

Increase/(decrease) in cash and cash equivalents

 

3.2

(55.0)

(55.0)

Cash and cash equivalents at beginning of the period

 

153.5

205.3

205.3

Exchange adjustments

 

(6.7)

2.3

3.2

Cash and cash equivalents at end of the period

 

150.0

152.6

153.5

Comprised of:

 

 

 

 

     Cash and cash equivalents at end of the period

 

147.6

152.6

153.5

     Cash included in Assets held for sale at end of the period

 

2.4

-

-

 

 

 

 

 

Net debt at beginning of the period

 

(1,167.1)

(1,335.3)

(1,335.3)

Increase/(decrease) in cash and cash equivalents

 

3.2

(55.0)

(55.0)

(Increase)/decrease in loans

 

(26.8)

134.0

222.6

Increase in accrued borrowing costs

 

(3.3)

-

-

Decrease in finance leases

 

-

0.2

0.4

Decrease/(increase) in overdrafts

 

3.3

(2.5)

(3.0)

Exchange adjustments

 

(6.6)

2.3

3.2

Net debt at end of the period †††

 

(1,197.3)

(1,256.3)

(1,167.1)

Purchase of intangible assets includes $1.2 million (30 June 2017: $nil million; 31 December 2017: $5.0 million) paid in relation to Ontic licences.

†† Purchase/(sale) of shares includes the share purchases for the share buy-back scheme, shares purchased for the Employee Benefit Trust and shares purchased for employees to settle their tax liabilities as part of the share schemes.

††† Within the Group's definition of net debt, the US private placement is included at its face value of $380 million (30 June 2017: $500 million; 31 December 2017: $500 million) reflecting the fact that the liabilities will be in place until maturity.  This is $4.9 million higher (30 June 2017: $8.7 million lower; 31 December 2017: $3.5 million lower) than its carrying value.  Also within the Group's definition of net cash the senior notes are included at their face value of $500 million reflecting the fact that the liabilities will be in place until maturity. This is $0.3m lower than its carrying value.

 

 

 

Unaudited condensed consolidated statement of changes in equity

 

 

Share capital

Share premium

Retained earnings

Other reserves

Total

Non-controlling interests

Total equity

 

$m

$m

$m

$m

$m

$m

$m

Balance at 1 January 2018

509.0

1,594.5

(50.1)

(121.7)

1,931.7

1.5

1,933.2

Profit for the period

-

-

66.7

-

66.7

-

66.7

Other comprehensive income/(loss) for the period

-

-

20.2

(26.5)

(6.3)

-

(6.3)

Total comprehensive income for the period

-

-

86.9

(26.5)

60.4

-

60.4

Dividends

-

-

(99.3)

-

(99.3)

-

(99.3)

Issue of share capital

0.3

-

-

-

0.3

-

0.3

Movement on treasury reserve

-

-

-

(5.4)

(5.4)

-

(5.4)

Credit to equity for equity-settled share-based payments

-

-

-

5.7

5.7

-

5.7

Changes in non-controlling interest

-

-

-

-

-

0.2

0.2

Tax on share-based payment transactions

-

-

0.1

-

0.1

-

0.1

Transfer to retained earnings

-

-

(0.5)

0.5

-

-

-

Balance at 30 June 2018

509.3

1,594.5

(62.9)

(147.4)

1,893.5

1.7

1,895.2

 

 

 

 

 

 

 

 

Balance at 1 January 2017

508.7

1,594.5

(52.2)

(134.0)

1,917.0

1.6

1,918.6

Profit for the period

-

-

52.4

-

52.4

0.1

52.5

Other comprehensive income for the period

-

-

2.4

0.5

2.9

-

2.9

Total comprehensive income for the period

-

-

54.8

0.5

55.3

0.1

55.4

Dividends

-

-

(91.5)

-

(91.5)

-

(91.5)

Issue of share capital

0.1

-

-

-

0.1

-

0.1

Movement on treasury reserve

-

-

-

(2.1)

(2.1)

-

(2.1)

Credit to equity for equity-settled share-based payments

-

-

-

3.9

3.9

-

3.9

Changes in non-controlling interest

-

-

0.2

-

0.2

-

0.2

Transfer to retained earnings

-

-

0.5

(0.5)

-

-

-

Balance at 30 June 2017

508.8

1,594.5

(88.2)

(132.2)

1,882.9

1.7

1,884.6

 

 

 

 

 

 

 

 

Balance at 1 January 2017

508.7

1,594.5

(52.2)

(134.0)

1,917.0

1.6

1,918.6

Profit for the period

-

-

119.4

-

119.4

(0.1)

119.3

Other comprehensive income for the period

-

-

5.8

8.8

14.6

-

14.6

Total comprehensive income for the period

-

-

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

-

-

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

 

 

 

Notes to the condensed consolidated half yearly financial statements

 

1          Basis of preparation

 

The unaudited condensed consolidated financial statements of BBA Aviation plc (the "Group"), for the six months ended 30 June 2018 have been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct Authority and International Accounting Standard IAS 34: Interim Financial Reporting (IAS 34) which permits the presentation of the financial information on a condensed basis.  These condensed consolidated half yearly financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, and therefore should be read in conjunction with the Group's Annual Report for the year ended 31 December 2017. 

 

The Group's annual financial statements for the year ended 31 December 2017 have been reported upon by the Group's auditor and delivered to the Registrar of Companies.  The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

 

These condensed consolidated half yearly financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) endorsed for use in the European Union and the Companies Act 2006, and comply with Article 4 of the EU IAS Regulation. There are no new or amended standards effective in the period which have had a material impact on the condensed consolidated interim financial statements. The Group adopted IFRS 9 and IFRS 15 from 1 January 2018 and further details of the impact of the accounting standards is referred to below.

 

Going concern

The directors are satisfied that, at the time of approving the condensed consolidated financial statements, it is appropriate to continue to adopt the going concern basis of accounting. Further information is given on page 8 of the interim statement.

 

Alternative Performance Measures (APMs)

In the reporting of financial information, the directors have adopted various Alternative Performance Measures (APMs). The Group's results are principally discussed on an 'adjusted' and/or 'underlying' basis. Results on an adjusted basis are presented before exceptional and other items. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measures.

 

All APMs have been defined, explained and reconciled to the nearest GAAP measure in note 17.

 

New financial reporting requirements

A number of EU-endorsed amendments to existing standards and interpretations were effective for annual periods beginning on or after 1 January 2018 and have been applied in preparing the Condensed Consolidated Financial Statements of the Group. There is no impact on the Condensed Consolidated Financial Statements of the Group from applying these standards.

 

The Group adopted from 1 January 2018 two significant changes to the IFRS framework being IFRS 9: Financial Instruments (IFRS 9) and IFRS 15: Revenue from contracts with customers (IFRS 15).

 

IFRS 9

 

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial 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 the transition the Group elected to recognise changes in the fair value of the equity investments in Alyssum Group Limited (previously known as Fly Victor Limited) and Lider Taxi Aero S.A. Air Brasil which are classified as financial instruments through other comprehensive income (FVTOCI).

 

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 adopted the hedge accounting requirements of IFRS 9 from 1 January 2018.

 

The Group performed an assessment of the impact of adopting IFRS 9 based on the financial instruments and hedging relationships upon transition to IFRS 9 and management concluded that the impact of IFRS 9 on the Group was not 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.

 

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 impact of IFRS 15:

 

Within the Aftermarket Services division, the methodology adopted for revenue recognition under IFRS 15 was not materially different from the previous standard, IAS 18 Revenue.

 

Within the Flight Support division, IFRS 15 did not 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 Group performed an assessment of the impact of adopting IFRS 15 based on the Group's trading upon transition to IFRS 15 and management concluded that the impact of IFRS 15 on the Group was not material.

 

Note that the majority of Aftermarket Services' repair and overhaul and a significant proportion of the engine & parts service activities are classified as a discontinued operation.

 

Financial reporting standards applicable for future financial periods

A number of EU-endorsed standards and amendments to existing standards and interpretations, which are described below, are effective for annual periods beginning on or after 1 January 2019 and have not been applied in preparing the Consolidated Financial Statements of the Group.

 

The most significant change to the IFRS framework in these forthcoming standards and amendments to standards is IFRS 16: Leases.  

 

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, with early adoption permitted for entities that apply IFRS 15 'Revenue recognition' at or before the date of initial application of IFRS 16.  The Group intends to transition to the new standard adopting the modified-retrospective approach.  Consequently, the comparatives will not be restated.

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 the 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, operating cash flow, net debt and leverage.

 

 

·      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.

Work during the first half of 2018 has included:

·      A detailed review of contracts to establish both lease classification and to capture the additional data which will be required under IFRS 16,

·      Assessing the different transition options available,

·      Preliminary quantification and modelling of the potential financial impacts,

·      Commencing reviews on potential systems solutions. 

Work in this area will continue during the second half of the year.  It is therefore not practicable to provide a reasonable estimate of the financial effect until the directors complete their review.

 

Assets and associated liabilities classified as held for sale

 

Assets classified as held for sale are measured at the lower of carrying amount or fair value less costs to sell.  Assets are classified as held for sale if their net carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.  Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year of the date of classification.

 

When the Group is committed to a sale plan involving loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

 

Discontinued operations presentation
Prior period results have been restated for the impact of the presentation of the ERO businesses as a discontinued operation.  ERO Middle East is not classified as a discontinued operation as it intended for these operations to be closed.

Further explanation of this change is presented in note 14.

 

2            Segmental analysis

 

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (for the Group, this is the Chief Executive) to allocate resources to the segments and to assess their performance.

Based on the above, the reportable segments of the Group are Flight Support and Aftermarket Services.

The businesses within the Flight Support segment provide re-fuelling, ground handling and other services to the business, general 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.

There has been no change to the Group's reportable segments since the last annual report.

 

 

2          Segmental analysis - continued

As at, and for the six months ended 30 June 2018

 

Flight Support1

Aftermarket Services5

Total

Unallocated Corporate2

Total

 

Business segments

Note

$m

$m

$m

$m

$m

 

External revenue

 

 

 

 

 

 

 

External revenue from continuing and discontinued operations

 

926.3

355.6

1,281.9

-

1,281.9

 

Less external revenue from ERO discontinued operations

14

-

(257.6)

(257.6)

-

(257.6)

 

External revenue from continuing operations

 

926.3

98.0

1,024.3

-

1,024.3

 

 

 

 

 

 

 

 

 

Underlying operating profit

 

 

 

 

 

 

 

Underlying operating profit/(loss) from continuing and discontinued operations

 

163.7

31.6

195.3

(14.8)

180.5

 

Less underlying operating profit from ERO discontinued operations

14

-

(7.7)

(7.7)

-

(7.7)

 

Adjusted for intergroup charges for ERO discontinued operations3

14

-

-

-

(5.7)

(5.7)

 

Underlying operating profit/(loss) from continuing operations

 

163.7

23.9

187.6

(20.5)

167.1

 

Underlying operating margin from continuing operations

 

17.7%

24.4%

18.3%

-

16.3%

 

 

Exceptional and other items

 

 

 

 

 

 

 

Exceptional and other items from continuing and discontinued operations

 

(37.7)

(13.8)

(51.5)

(0.8)

(52.3)

 

Less exceptional and other items from ERO discontinued operations

14

-

1.1

1.1

-

1.1

 

Exceptional and other items from continuing operations

3

(37.7)

(12.7)

(50.4)

(0.8)

(51.2)

 

 

 

 

 

 

 

 

 

Operating profit/(loss) from continuing operations

 

126.0

11.2

137.2

(21.3)

115.9

 

Impairment of fixed assets

 

 

 

 

 

(12.8)

 

Net finance costs

 

 

 

 

 

(26.9)

 

Profit before tax from continuing operations

 

 

 

 

 

76.2

 

 

 

 

 

 

 

 

 

Other information

 

 

 

 

 

 

Capital additions4

 

29.7

14.6

44.3

-

44.3

Depreciation and amortisation

 

70.1

14.7

84.8

0.2

85.0

Balance sheet

 

 

 

 

 

 

Total assets

 

3,156.0

834.8

3,990.8

67.9

4,058.7

Total liabilities

 

(339.7)

(176.1)

(515.8)

(1,647.7)

(2,163.5)

Net assets/(liabilities)

 

2,816.3

658.7

3,475.0

(1,579.8)

1,895.2

                         

1 Operating profit/(loss) from continuing operations includes $1.7 million (30 June 2017: $1.7 million; 31 December 2017: $3.4 million) relating to profits of associates and joint ventures.

2 Unallocated corporate balances include debt, tax, provisions, pensions, insurance captives and trading balances from central activities.

3 Costs previously allocated to ERO.

4 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.

5 In 2018, ERO entered into a series of sale and lease-back transactions with respect to parts of its rental engine fleet.  The transactions led to the recognition of $10.0 million of revenue within discontinued operations.
 

2          Segmental analysis - continued

Restated

As at, and for the six months ended 30 June 2017

 

Flight Support1

Aftermarket Services

Total

Unallocated Corporate2

Total

Business segments

Note

$m

$m

$m

$m

$m

External revenue

 

 

 

 

 

 

External revenue from continuing and discontinued operations

.

841.0

342.7

1,183.7

-

1,183.7

Less external revenue from ERO discontinued operations

14

-

(246.9)

(246.9)

-

(246.9)

Less external revenue from ASIG discontinued operations

14

(38.2)

-

(38.2)

-

(38.2)

External revenue from continuing operations

 

802.8

95.8

898.6

-

898.6

 

 

 

 

 

 

 

Underlying operating profit

 

 

 

 

 

 

Underlying operating profit/(loss) from continuing and discontinued operations

 

160.6

26.0

186.6

(11.9)

174.7

Less underlying operating profit from ERO discontinued operations

14

-

(4.0)

(4.0)

-

(4.0)

Adjusted for intergroup charges for ERO discontinued operations3

 

-

-

-

(5.6)

(5.6)

Less underlying operating loss from ASIG discontinued operations

14

0.2

-

0.2

-

0.2

Underlying operating profit/(loss) from continuing operations

 

160.8

22.0

182.8

(17.5)

165.3

Underlying operating margin from continuing operations

 

20.0%

23.0%

20.3%

-

18.4%

 

Exceptional and other items

 

 

 

 

 

 

Exceptional and other items from continuing and discontinued operations

 

(41.1)

(9.3)

(50.4)

(1.6)

(52.0)

Less exceptional and other items from ERO discontinued operations

14

-

3.7

3.7

-

3.7

Exceptional and other items from continuing operations

3

(41.1)

(5.6)

(46.7)

(1.6)

(48.3)

 

 

 

 

 

 

 

Operating profit/(loss) from continuing operations

 

119.7

16.4

136.1

(19.1)

117.0

Net finance costs from continuing operations

 

 

 

 

 

(31.2)

Profit before tax from continuing operations

 

 

 

 

 

85.8

 

 

 

 

 

 

 

Other information

 

 

 

 

 

 

Capital additions4

 

32.0

6.2

38.2

-

38.2

Depreciation and amortisation

 

75.4

14.2

89.6

0.2

89.8

Balance sheet

 

 

 

 

 

 

Total assets

 

3,203.7

773.2

3,976.9

95.7

4,072.6

Total liabilities

 

(297.9)

(141.2)

(439.1)

(1,748.9)

(2,188.0)

Net assets/(liabilities)

 

2,905.8

632.0

3,537.8

(1,653.2)

1,884.6

 

 

 

2          Segmental analysis - continued

 

Restated

As at, and for the year ended 31 December 2017

 

Flight Support1

Aftermarket Services

Total

Unallocated Corporate2

Total

Business segments

Note

$m

$m

$m

$m

$m

External revenue

 

 

 

 

 

 

External revenue from continuing and discontinued operations

 

1,681.4

727.6

2,409.0

-

2,409.0

Less external revenue from ERO discontinued operations

14

-

(513.3)

(513.3)

-

(513.3)

Less external revenue from ASIG discontinued operations

14

(38.4)

-

(38.4)

-

(38.4)

External revenue from continuing operations

 

1,643.0

214.3

1,857.3

-

1,857.3

 

 

 

 

 

 

 

Underlying operating profit

 

 

 

 

 

 

Underlying operating profit/(loss) from continuing and discontinued operations

 

329.2

65.3

394.5

(34.1)

360.4

Less underlying operating profit from ERO discontinued operations

14

-

(12.5)

(12.5)

-

(12.5)

Adjusted for intergroup charges for ERO discontinued operations3

14

-

-

-

(11.6)

(11.6)

Less underlying operating loss from ASIG discontinued operations

14

0.2

-

0.2

-

0.2

Underlying operating profit/(loss) from continuing operations

 

329.4

52.8

382.2

(45.7)

336.5

Underlying operating margin from continuing operations

 

20.0%

24.6%

20.6%

-

18.1%

 

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 ERO discontinued operations

14

-

5.6

5.6

-

5.6

Exceptional and other items from continuing operations

3

(82.3)

(26.1)

(108.4)

(9.0)

(117.4)

 

 

 

 

 

 

 

Operating profit/(loss) from continuing operations

 

247.1

26.7

273.8

(54.7)

219.1

Net finance costs from continuing operations

 

 

 

 

 

(61.5)

Profit before tax from continuing operations

 

 

 

 

 

157.6

Other information

 

 

 

 

 

 

Capital additions4

 

60.0

25.3

85.3

-

85.3

Depreciation and amortisation

 

151.9

29.0

180.9

0.4

181.3

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

 

 

 

 

2          Segmental analysis - continued

 

Geographical segments

Revenue by destination

Revenue by origin

Capital additions1

Non-current assets2

 

$m

$m

$m

$m

As at, and for the six months ended 30 June 2018

 

 

 

 

United Kingdom

34.5

131.1

4.0

281.6

Mainland Europe

115.0

31.7

0.3

68.4

North America

1,086.6

1,106.1

39.9

2,855.7

Rest of world

45.8

13.0

0.1

4.5

Total from continuing and discontinued operations

1,281.9

1,281.9

44.3

3,210.2

Less discontinued ERO operations

(257.6)

(257.6)

 

 

Total from continuing operations

1,024.3

1,024.3

 

 

 

Restated as at, and for the six months ended 30 June 2017

 

 

 

 

United Kingdom

39.8

137.0

2.2

236.9

Mainland Europe

103.2

26.5

0.3

48.8

North America

993.7

1,010.1

35.2

3,066.2

Rest of world

47.0

10.1

0.5

20.0

Total from continuing and discontinued operations

1,183.7

1,183.7

38.2

3,371.9

Less ERO discontinued operations

(246.9)

(246.9)

 

 

Less ASIG discontinued operations

(38.2)

(38.2)

 

 

Total from continuing operations

898.6

898.6

 

 

 

 

 

 

 

Restated as at, and for the year ended 31 December 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 ERO discontinued operations

(513.3)

(513.3)

 

 

Less ASIG discontinued operations

(38.4)

(38.4)

 

 

Total from continuing operations

1,857.3

1,857.3

 

 

 

1 Capital additions represent cash expenditures in the year.

2 The disclosure of non-current assets by geographical segment has been amended to exclude balances related to deferred tax and financial instruments in all periods, as required under IFRS 8.

 

 

3          Exceptional and other items

Underlying profit is shown before exceptional and other items on the face of the income statement. Exceptional and other items are items which are material and non-recurring in nature and also include costs relating to acquisitions, disposal and significant business restructuring programmes some of which span multiple years. This is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee, and assists in providing a meaningful analysis of the trading results of the Group. Other items include amortisation of acquired intangibles accounted for under IFRS 3.  Exclusion of amortisation of acquired intangibles accounted for under IFRS 3 from the Group's underlying results assists with the comparability of the Group's underlying profitability with peer companies.

Exceptional and other items on discontinued operations are presented in note 14. Exceptional and other items on continuing operations are as follows:

 

Six months ended 30 June 2018

Restated

Six months ended 30 June 2017

 

Restated

Year ended 31 December 2017

 

Administrative expenses

Other operating expenses

Restructuring costs

Total

Total

Total

 

$m

$m

$m

$m

$m

$m

Restructuring expenses

 

 

 

 

 

 

ERO Middle East closure

-

-

6.1

6.1

-

15.7

Central costs rationalisation

-

-

1.6

1.6

1.6

6.7

Acquisition related

 

 

 

 

 

 

Amortisation of intangibles assets         arising on acquisition and valued in accordance with IFRS 3

43.5

-

-

43.5

46.7

93.8

Transaction costs1

-

-

-

-

-

0.1

    Other

-

-

-

-

-

1.1

Operating loss on continuing operations

43.5

-

7.7

51.2

48.3

117.4

Impairment loss

 

 

 

12.8

-

-

Loss before tax on continuing operations

 

 

64.0

48.3

117.4

Net impact of United States tax reform

 

 

 

-

-

20.5

Tax on other exceptional items

 

 

 

(14.7)

(18.0)

(32.7)

Tax impact of exceptional and other items

 

 

(14.7)

(18.0)

(12.2)

Loss for the year on continuing operations

 

 

49.3

30.3

105.2

Loss/(profit) from ERO discontinued operation, net of tax, see note 14

 

 

 

5.0

2.4

(0.7)

Loss from ASIG discontinued operation, net of tax, see note 14

 

 

 

-

31.9

22.5

Total exceptional and other items

 

54.3

64.6

127.0

 

 

 

 

 

 

                       

1 All transaction costs presented in exceptional and other items in the prior period related to Ontic's acquisition of the GE Avionics portfolio.

4          Income tax

 

 

Six months ended 30 June 2018

Restated

Six months ended 30 June 2017

Restated

Year ended 31 December 2017

 Recognised in the income statement

$m

$m

$m

Current tax expense/(credit)

17.1

(2.3)

21.9

Adjustments in respect of prior periods - current tax

-

(1.2)

(6.2)

Current tax

17.1

(3.5)

15.7

Deferred tax (credit)/expense

(2.3)

8.6

24.8

Adjustments in respect of prior periods - deferred tax

-

-

(1.4)

Deferred tax

(2.3)

8.6

23.4

Income tax expense for the period from continuing operations

14.8

5.1

39.1

Tax expense/(credit) relating to ERO discontinued operations

1.5

1.8

(5.4)

Tax expense relating to ASIG discontinued operations

-

25.3

15.7

Total income tax expense

16.3

32.2

49.4

 

4          Income tax - continued

Corporation tax on continuing operations for the interim period is charged at an effective rate of 21.0% (30 June 2017: 17.2%; 31 December 2017: 18.7%) on underlying profit before tax, representing the best estimate of the weighted average annual corporation tax expected for the full financial year.  The total income tax expense for the six months ended 30 June 2018 includes a tax credit of $14.7 million (30 June 2017: $18.0 million; 31 December 2017: $12.2 million) relating to exceptional and other items (see note 3).

On 22 December 2017, the United States enacted tax reform that implemented 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, in 2017 the Group re-measured a deferred tax asset relating to financing costs from prior year amounting to a charge of $54.5 million together with a charge of $22.3 million.  Also in 2017, the tax reform introduced a tax on repatriation of profits of overseas subsidiaries resulting in a charge of $3 million.

The Group is monitoring developments in relation to the EU State Aid investigation including the European Commission's announcement on 26 October 2017 that it will conduct a State Aid investigation into the UK's Controlled Foreign Company (CFC) regime.  In common with many other UK based multinational groups whose arrangements are in line with current UK CFC legislation, the Group may be affected by the final outcome of this investigation.  We have calculated our maximum potential liability to be approximately $100 million. We do not consider that any provision is required based on our current assessment of the issue.

Tax credited to other comprehensive income and equity is as follows:

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended 31 December 2017

Recognised in other comprehensive income and equity

$m

$m

$m

Recognised in other comprehensive income

 

 

 

Tax on items that will not be reclassified subsequently to profit or loss

 

 

 

Current tax credit on pension deficit payments

-

-

0.5

Deferred tax (expense)/credit on actuarial gains/(losses)

(5.4)

(0.9)

(1.6)

 

(5.4)

(0.9)

(1.1)

Tax on items that may be reclassified subsequently to profit or loss

 

 

 

Current tax credit on foreign exchange movements

-

-

(1.6)

Deferred tax (expense)/credit on derivative instruments

0.4

(1.1)

(2.7)

 

0.4

(1.1)

(4.3)

Total tax expense within other comprehensive income

(5.0)

(2.0)

(5.4)

 

 

 

 

Recognised in equity

 

 

 

Current tax credit on share-based payments movements

0.1

0.1

0.8

Deferred tax credit on share-based payments movements

-

0.1

-

Total tax credit within equity

0.1

0.2

0.8

 

 

 

 

Total tax expense within other comprehensive income and equity

(4.9)

(1.8)

(4.6)

         

5          Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data: 

 

Continuing

Total

 

Six months ended 30 June 2018

Restated

Six months ended 30 June 2017

Restated

Year ended 31 December 2017

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended 31 December 2017

 

$m

$m

$m

$m

$m

$m

 

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

Earnings:

 

 

 

 

 

 

Profit for the period

61.4

80.7

118.5

66.7

52.5

119.3

Non-controlling interests

-

(0.1)

0.1

-

(0.1)

0.1

Basic earnings attributable to ordinary shareholders

61.4

80.6

118.6

66.7

52.4

119.4

Exceptional and other items net of tax

49.3

30.3

105.2

54.3

64.6

127.0

Adjusted earnings for adjusted earnings per share

110.7

110.9

223.8

121.0

117.0

246.4

Underlying deferred tax

11.8

26.3

50.9

12.5

29.6

47.7

Adjusted earnings for cash earnings per share

122.5

137.2

274.7

133.5

146.6

294.1

 

 

 

Continuing

Total

 

Six months ended 30 June 2018

Six months ended 30 June 2017

 

Year ended 31 December 2017

Six months ended 30 June 2018

 

Six months ended 30 June 2017

   

Year ended 
31 December 2017

 

 

$m

$m

$m

$m

$m

$m

Number of shares

 

 

 

 

 

 

Weighted average number of 29 16/21p ordinary shares:

 

 

 

 

 

 

For basic earnings per share

1,029.9

1,027.5

1,028.2

1,029.9

1,027.5

1,028.2

Dilutive potential ordinary shares from share options

10.4

12.1

10.6

10.4

12.1

10.6

For diluted earnings per share

1,040.3

1,039.6

1,038.8

1,040.3

1,039.6

1,038.8

For diluted losses per share

1,029.9

1,027.5

1,028.2

1,029.9

1,027.5

1,028.2

 

 

 

 

 

 

 

 

                       

Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease earnings per share, or increase the loss per share.

 

 

Continuing

Total

 

Six months ended 30 June 2018

Restated

Six months ended 30 June 2017

    

Restated Year ended 31 December 2017

Six months ended 30 June 2018

 

Six months ended 30 June 2017

   

Year ended 
31 December 2017

Earnings per share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

   Adjusted

10.7¢

10.8¢

21.8¢

11.7¢

11.4¢

24.0¢

   Cash

11.9¢

13.4¢

26.7¢

13.0¢

14.3¢

28.6¢

   Unadjusted

6.0¢

7.8¢

11.5¢

6.5¢

5.1¢

11.6¢

Diluted:

 

 

 

 

 

 

   Adjusted

10.6¢

10.7¢

21.5¢

11.6¢

11.3¢

23.7¢

   Cash

11.8¢

13.2¢

26.4¢

12.8¢

14.1¢

28.3¢

   Unadjusted

5.9¢

7.8¢

11.4¢

6.4¢

5.0¢

11.5¢

 

  

 5           Earnings per share - continued

 

Earnings per share on discontinued operations is presented in note 14.

 

Adjusted earnings per share is presented calculated on earnings before exceptional and other items (note 17). Cash earnings per share is calculated on earnings before exceptional and other items (note 17) and using current tax charge, not the total tax charge for the period thereby excluding the deferred tax charge. Both adjustments have been made because the directors consider that this gives a useful indication of underlying performance.

6          Equity dividends on ordinary shares 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended 31 December 2017

 

 

$m

$m

$m

 

Paid during the period: 

 

 

 

 

Final dividend for the year ended 31 December 2017: 9.59 cents per share (30 June 2017:  Final dividend for the year ended 31 December 2016 of 9.12 cents per share; 31 December 2017: Final dividend for the year ended 31 December 2016 of 9.12 cents per share and 2017 interim dividend of 3.81 cents per share)

99.3

91.5

130.7

 

 

 

 

 

               

The 2018 interim dividend of 4.00 cents per share (2017: 3.81 cents per share; $39.2 million in total) was approved by the Board of Directors on 31 July 2018 and will be paid on 2 November 2018 to ordinary shareholders registered on 14 September 2018. Shareholders will receive their dividends in sterling unless they complete and submit to the Company's registrars by 5.30pm on 8 October 2018 an election form stating their wish to receive their dividends in US dollars. The sterling dividend will be converted at a prevailing exchange rate on 9 October 2018 and this exchange rate will be announced on 10 October 2018.

7          Cash and cash equivalents and borrowings

The carrying value of cash and cash equivalents for continuing operations of $147.6 million (30 June 2017: $152.6 million; 31 December 2017: $153.5 million) approximates to its fair value.

 

Borrowings

As at 30 June 2018

$m

As at 30 June 2017

$m

As at 31 December 2017

$m

Bank overdrafts

0.7

3.5

4.0

Bank loans

473.7

902.2

813.3

Loan notes

373.9

507.2

502.2

Bonds

489.8

-

-

Other loans

0.3

3.2

3.3

 

1,338.4

1,416.1

1,322.8

 

 

 

 

The borrowings are repayable as follows:

 

 

 

On demand or within one year

0.7

124.4

124.2

In the second year

-

455.5

369.3

In the third to fifth years inclusive

700.6

624.6

619.6

After five years

637.1

211.6

209.7

 

1,338.4

1,416.1

1,322.8

Less: Amount due for settlement within 12 months (shown within current liabilities)

(0.7)

(124.4)

(124.2)

Amount due for settlement after 12 months

1,337.7

1,291.7

1,198.6

Bank loans and loan notes are stated after their respective transaction costs and related amortisation.

 

7          Cash and cash equivalents and borrowings - continued

 

As at 30 June 2018

 

Type

Facility

Amount

Headroom

Principal

Amortisation

 costs

Fair value

adjustment

Drawn

Facility Date

Maturity Date

 

$m

$m

$m

$m

$m

$m

 

 

Multicurrency revolving bank credit facility

650.0

618.0

32.0

(6.0)

-

26.0

Mar 2018

Mar 2023

Acquisition facility Bank term loan - Facility C1

450.0

-

450.0

(2.3)

-

447.7

Sep 2015

Sep 2020

Total bank loans

1,100.0

618.0

482.0

(8.3)

-

473.7

 

 

$300m US private placement senior notes - Series B

120.0

-

120.0

(0.3)

(0.5)

119.2

May 2011

May 2021

$300m US private placement senior notes - Series C

60.0

-

60.0

(0.2)

(2.0)

57.8

May 2011

May 2023

$200m US private placement senior notes - Series A

50.0

-

50.0

(0.2)

-

49.8

Dec 2014

Dec 2021

$200m US private placement senior notes - Series B

100.0

-

100.0

(0.3)

(1.6)

98.1

Dec 2014

Dec 2024

$200m US private placement senior notes - Series C

50.0

-

50.0

(0.2)

(0.8)

49.0

Dec 2014

Dec 2026

Total US private placement senior notes

380.0

-

380.0

(1.2)

(4.9)

373.9

 

 

$500m senior notes

500.0

-

500.0

(10.5)

0.3

489.8

Apr 2018

May 2026

Total senior notes

500.0

-

500.0

(10.5)

0.3

489.8

 

 

 

 

 

 

 

 

 

 

 

Total bank loans, loan notes and bonds

1,980.0

618.0

1,362.0

(20.0)

(4.6)

1,337.4

 

 

Bank overdraft

 

 

 

 

 

0.7

 

 

Other loans

 

 

 

 

 

0.3

 

 

Borrowings

 

 

 

 

 

1,338.4

 

 

 

As at 30 June 2017

 

Type

Facility Amount

Headroom

Principal

Amortisation costs

Fair value adjustment

Drawn

Facility Date

Maturity Date

 

 

$m

$m

$m

$m

$m

$m

 

 

Multicurrency revolving bank credit facility

650.0

445.0

205.0

(1.4)

-

203.6

Apr 2014

Apr 2019

Acquisition facility bank term loan - Facility B1

253.4

-

253.4

(1.5)

-

251.9

Sep 2015

Feb 2019

Acquisition facility Bank term loan - Facility C1

450.0

-

450.0

(3.3)

-

446.7

Sep 2015

Sep 2020

Total bank loans

1,353.4

445.0

908.4

(6.2)

-

902.2

 

 

$300m US private placement senior notes - Series A

120.0

-

120.0

(0.4)

1.3

120.9

May 2011

May 2018

$300m US private placement senior notes - Series B

120.0

-

120.0

(0.4)

4.3

123.9

May 2011

May 2021

$300m US private placement senior notes - Series C

60.0

-

60.0

(0.2)

0.6

60.4

May 2011

May 2023

$200m US private placement senior notes - Series A

50.0

-

50.0

(0.1)

1.2

51.1

Dec 2014

Dec 2021

$200m US private placement senior notes - Series B

100.0

-

100.0

(0.3)

0.8

100.5

Dec 2014

Dec 2024

$200m US private placement senior notes - Series C

50.0

-

50.0

(0.1)

0.5

50.4

Dec 2014

Dec 2026

Total loan notes

500.0

(1.5)

507.2

 

 

 

 

 

 

 

 

 

 

 

Total bank loans and loan notes

1,853.4

445.0

1,408.4

(7.7)

8.7

1,409.4

 

 

Bank overdraft

 

 

3.5

 

 

Other loans

 

 

 

 

 

3.2

 

 

Borrowings

 

 

 

 

 

1,416.1

 

 

                                   

  

7          Cash and cash equivalents and borrowings - continued

 

As at 31 December 2017

 

Type

Facility Amount

Headroom

Principal

Amortisation costs

Fair value adjustment

Drawn

Facility Date

Maturity Date

 

$m

$m

$m

$m

$m

$m

 

 

Multicurrency revolving bank credit facility

650.0

535.0

115.0

(1.2)

-

113.8

Apr 2014

Apr 2019

Acquisition facility bank term loan - Facility B1

253.4

-

253.4

(1.0)

-

252.4

Sep 2015

Feb 2019

Acquisition facility Bank term loan - Facility C1

450.0

-

450.0

(2.9)

-

447.1

Sep 2015

Sep 2020

Total bank loans

1,353.4

535.0

818.4

(5.1)

-

813.3

 

 

$300m US private placement senior notes - Series A

120.0

-

120.0

(0.3)

0.5

120.2

May 2011

May 2018

$300m US private placement senior notes - Series B

120.0

-

120.0

(0.3)

2.3

122.0

May 2011

May 2021

$300m US private placement senior notes - Series C

60.0

-

60.0

(0.2)

(0.3)

59.5

May 2011

May 2023

$200m US private placement senior notes - Series A

50.0

-

50.0

(0.1)

0.7

50.6

Dec 2014

Dec 2021

$200m US private placement senior notes - Series B

100.0

-

100.0

(0.3)

0.1

99.8

Dec 2014

Dec 2024

$200m US private placement senior notes - Series C

50.0

-

50.0

(0.1)

0.2

50.1

Dec 2014

Dec 2026

Total loan notes

500.0

-

500.0

(1.3)

3.5

502.2

 

 

 

 

 

 

 

 

 

 

 

Total bank loans and loan notes

1,853.4

535.0

1,318.4

(6.4)

3.5

1,315.5

 

 

Bank overdraft

 

 

 

 

 

4.0

 

 

Other loans

 

 

 

 

 

3.3

 

 

Borrowings

 

 

 

 

 

1,322.8

 

 

                   

¹ Drawings carried forward under the acquisition term debt facilities from 2017 were $253.4m for Facility B and $450m for Facility C. On 26 April 2018, BBA U.S. Holdings Inc., a member of the Group, issued $500m of senior notes due 2026. Part of the net proceeds was used to prepay all outstanding Facility B loans in full under the requirements of the loan documentation. 

 

As at 30 June 2018, the Group had $380 million (30 June 2017: $500 million; 31 December 2017: $500 million) of U.S. private placement senior loan notes outstanding with $280 million (30 June 2017: $400 million; 31 December 2017: $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.

During the first half, the Group refinanced its $650 million multicurrency revolving credit facility (RCF) with a new facility for the same amount which will expire in March 2023. As part of this refinancing exercise, BBA U.S. Holdings Inc. has been added as an additional borrower and guarantor under the RCF and Facility C of the acquisition bank term loan due to expire in September 2020. As at 30 June 2018, $32 million was drawn under the RCF in the name of BBA U.S. Holdings Inc. and the term debt drawn under Facility C remains in the name of BBA Aviation plc. In addition, BBA U.S. Holdings Inc. has been added as an additional guarantor under the U.S. private placement senior notes.

As at 30 June 2018, the Group also had $500 million of U.S. senior loan notes outstanding with $250 million accounted for at fair value through profit and loss as the fair value interest rate risk has been hedged from fixed to floating rates. The remainder is accounted for at amortised cost.

Under IFRS hedge accounting rules the fair value movement on the loan notes is booked to interest and is offset by the fair value movement on the underlying interest rate swaps.

The Group excludes the fair value movement on its loan notes from its definition of net debt (note 17), as this movement is offset by the change in fair value of the underlying interest rate swaps. The fair value loss on its U.S. private placement senior loan notes at 30 June 2018 was $4.9 million (30 June 2017: $8.7 million gain; 31 December 2017: $3.5 million gain). The fair value gain on its U.S. senior loan notes at 30 June 2018 was $0.3 million.

All other borrowings are held at amortised cost.

 

 

8          Financial instruments

Categories of financial instruments

The carrying values of the financial instruments of the Group are analysed below:

 

30 June
2018

30 June
2017

31 December 2017

 

Carrying value

Carrying value

Carrying value

 

$m

$m

$m

Financial assets

 

 

 

Fair value through profit or loss - foreign exchange contractsa

1.1

-

-

Derivative instruments held in fair value hedgesb

0.3

5.8

1.5

Derivative instruments held in cash flow hedges

8.3

4.7

10.4

Assets classified as financial instruments measured through other comprehensive income (FVTOCI)

5.1

4.5

5.4

Trade and other receivables (including cash and cash equivalents)c, d

294.2

380.2

395.8

 

309.0

395.2

413.1

 

 

 

 

Financial liabilities

 

 

 

Fair value through profit or loss - foreign exchange contractsa

(0.1)

(4.8)

(2.5)

Derivative instruments held in fair value hedgesb

(6.9)

-

(0.3)

Derivative instruments held in cash flow hedges

(2.5)

(4.7)

(2.3)

Financial liabilities at amortised costd

(1,097.7)

(1,305.5)

(1,233.6)

Financial liabilities at fair value

(519.4)

(406.3)

(402.0)

 

(1,626.6)

(1,721.3)

(1,640.7)

 

a The foreign exchange contracts disclosed as fair value through profit or loss are not designated in a formal hedging relationship and are used to hedge foreign currency flows through the BBA Aviation plc company bank accounts to ensure that the Group is not exposed to foreign exchange risk through the management of its international cash management structure.

b Derivative instruments held in fair value hedges are designated in formal hedging relationships and are used to hedge the change in fair value of fixed rate US dollar borrowings.

c Recoveries from third parties in respect of environmental and other liabilities totalling $5.7 million (30 June 2017: $5.7 million; 31 December 2017: $5.7m) are included within trade and other receivables.

d The carrying value of trade and other receivables, and other payables approximates their fair value.

 

 

 

Derivative financial instruments

The fair values and notional amounts of derivative financial instruments are shown below.  The fair value on initial recognition is the transaction price unless part of the consideration given or received is for something other than the instrument itself. The fair value of derivative financial instruments is subsequently calculated using discounted cash flow techniques or other appropriate pricing models. All valuation techniques take into account assumptions based upon available market data at the balance sheet date.  The notional amounts are based on the contractual gross amounts at the balance sheet date.

 

The fair values of the assets classified as financial instruments within other comprehensive income and derivative financial instruments are categorised within Level 2 of the fair value hierarchy on the basis that their fair value has been calculated using inputs that are observable in active markets which are related to the individual asset or liability.  The Group does not have any derivative financial instruments which would be categorised as either Level 1 or 3 of the fair value hierarchy.

 

 

 

8          Financial instruments - continued

 

 

30 June 2018

30 June 2018

30 June 2017

30 June 2017

31 December 2017

31 December 2017

 

Notional amount

Fair value

Notional amount

Fair value

Notional amount

Fair value

Derivative financial assets

$m

$m

$m

$m

$m

$m

Derivatives not in a formal hedging relationship

 

 

 

 

 

 

Foreign exchange forward contracts

114.1

1.1

1.6

-

0.9

-

Fair value hedges

 

 

 

 

 

 

Interest rate swaps

(250.0)

0.3

(400.0)

5.8

(270.0)

1.5

Cash flow hedges

 

 

 

 

 

 

Interest rate swaps

(291.0)

6.6

(567.5)

2.8

(526.6)

6.6

Foreign exchange forward contracts

(18.4)

1.7

(55.3)

1.9

(75.5)

3.8

 

(445.3)

9.7

(1,021.2)

10.5

(871.2)

11.9

 

 

 

 

 

 

 

                       

 

 

30 June 2018

30 June 2018

30 June 2017

30 June 2017

31 December 2017

31 December 2017

 

Notional amount

Fair value

Notional amount

Fair value

Notional amount

Fair value

Derivative financial liabilities

$m

$m

$m

$m

$m

$m

Derivatives not in a formal hedging relationship

 

 

 

 

 

 

Foreign exchange forward contracts

72.8

(0.1)

351.9

(4.8)

309.4

(2.5)

Fair value hedges

 

 

 

 

 

 

Interest rate swaps

(280.0)

(6.9)

-

-

(130.0)

(0.3)

Cash flow hedges

 

 

 

 

 

 

Interest rate swaps

(50.0)

(0.1)

(275.0)

(2.5)

(100.0)

(1.0)

Foreign exchange forward contracts

(42.4)

(2.4)

(19.8)

(2.2)

(4.1)

(1.3)

 

(299.6)

(9.5)

57.1

(9.5)

75.3

(5.1)

 

 

 

 

 

 

 

                       

Adjustments relating to the credit risk of BBA Aviation plc and its counterparties, as defined within IFRS 13, are immaterial in the current period and prior periods.  
 

9          Net cash flow from operating activities

 


Six months ended 30 June 2018

 

Six months ended 30 June 2017

 

Year ended 31 December 2017

 

$m

$m

$m

Operating profit

115.9

117.0

219.1

Operating profit from ERO discontinued operations

12.3

5.9

18.5

Operating loss from ASIG discontinued operations

-

(0.2)

(0.2)

Share of profit from associates and joint ventures

(1.7)

(1.7)

(3.4)

Profit from operations

126.5

121.0

234.0

Depreciation of property, plant and equipment

35.3

35.5

71.4

Amortisation of intangible assets

49.7

54.3

109.9

Loss/(profit) on sale of property, plant and equipment

0.6

0.6

(2.2)

Share-based payment expense

5.7

3.9

9.9

Decrease in provisions

(2.8)

(4.8)

(7.3)

Pension scheme payments

(2.2)

(2.1)

(5.1)

Non-cash impairment

-

-

15.7

Other non-cash items

(1.1)

(2.5)

1.3

Unrealised foreign exchange movements

(0.7)

(0.6)

(0.5)

Operating cash inflows before movements in working capital

211.0

205.3

427.1

Increase in working capital

(23.7)

(65.1)

(46.3)

Cash generated by operations

187.3

140.2

380.8

Net income taxes paid

(10.2)

(18.8)

(41.8)

Net cash inflow from operating activities

177.1

121.4

339.0

 

10         Acquisitions

In the period, the Group acquired two businesses:

 

Honeywell licences

On 26 March 2018 the Group's Ontic business acquired an exclusive perpetual licence for LCD cockpit displays from Honeywell for a total consideration of $25.9 million. Ontic has paid $16.5 million upfront and the remaining $9.4 million is deferred consideration. The rights and processes acquired in this acquisition constitute a business under the definition of IFRS 3.

The provisional fair value of the net assets acquired comprise $26.1 million intangible assets, $0.6 million inventories and $0.8 million provisions.

 

In the period since acquisition, the operations acquired have contributed $2.6 million to revenue and $1.6 million to operating profit.  If the acquisition had occurred on the first day of the financial year, the total revenue and operating profit from these acquisition is estimated to be $5.2 million and $3.2 million respectively.

 

Esterline Racal Acoustics licences

On 4 January 2018 the Group's Ontic business acquired the manufacturing rights and processes to support a variety of parts that are fitted onto the Hawk platform from Esterline Racal Acoustics for a total consideration of $4.8 million. The rights and processes acquired in this acquisition constitute a business under the definition of IFRS 3. The provisional fair value of the net assets acquired comprise $6.6 million intangible assets, $1.1 million deferred tax liability and $0.7 million provisions.

 

In the period since acquisition, the operations acquired have contributed $0.1 million to revenue and operating profit respectively.  If the acquisition had occurred on the first day of the financial year, the total revenue and operating profit from these acquisition is estimated to be $0.1 million respectively.

 

Prior period acquisitions

As disclosed in the 2017 annual report the Group's Ontic business made several acquisitions in 2017. No measurement period adjustments have been made in the period. The fair values disclosed in the prior year were final. Further information in relation to the purchase price accounting for these acquisitions is available in the 2017 annual report and accounts.

 

11         Disposals

On 31 January 2017 the Group completed the sale of its ASIG business and received gross proceeds of $202.0 million. The net proceeds of $170.5 million are stated after disposal costs and a working capital and net debt adjustment to the proceeds.
 

12         Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.  Details of transactions between the Group and other related parties are detailed below.

During the period, Group companies entered into the following transactions with related parties who are not members of the Group: 

 

Sales of goods

Purchases of goods

 

Six months ended

30 June 2018

Six months ended      30 June 2017

Year ended 31 December 2017

Six months ended      30 June 2018

Six months ended      30 June 2017

Year ended 31 December 2017

 

$m

$m

$m

$m

$m

$m

Associates and joint ventures

2.3

2.1

14.4

366.9

303.6

610.5

               

 

 

Amounts owed by related parties

Amounts owed to related parties

 

30 June 2018

30 June 2017

31 December 2017

30 June 2018

30 June 2017

31 December 2017

 

$m

$m

$m

$m

$m

$m

Associates and joint ventures

0.1

1.2

2.0

85.8

91.6

64.7

 

Purchases of goods principally relates to the purchase of aviation fuel.  Purchases were made at market price, discounted to reflect the quantity of goods purchased.  The amounts outstanding are unsecured and will be settled in cash.  No guarantees have been given or received. 

The Group has various pension and other post-retirement benefit schemes for its employees.  Details are set out in note 13.

 

13         Pensions and other post-retirement benefits

The Group operates a number of plans worldwide, both of the defined benefit and defined contribution type. The defined benefit obligation at 30 June 2018 for the UK Income and Protection Plan (the "IPP" or "UK Plan") under IAS 19 is estimated based on the latest completed actuarial valuation as at 31 March 2015, with assumptions updated to reflect market conditions as at 30 June 2018 where appropriate. The next actuarial valuation as at 31 March 2018 is currently in progress and will be considered at the year-end. Pension costs are calculated by independent qualified actuaries, using the projected unit method and assumptions appropriate to the arrangements in place.

 

As at 30 June 2018, the IAS 19 valuation of the UK plan and US schemes indicate a net deficit of $44.5 million (30 June 2017: $80.1 million; 31 December 2017: $71.7 million).  The reduction in the net deficit of $27.2 million since 31 December 2017 reflects contributions and the favourable impact of market based financial assumptions slightly offset by asset performance being under expectations and liability experience losses.

 

 

14         Discontinued operations

 

It was announced in March 2018 that ERO was under strategic review. At the end of May 2018, management committed to a plan to sell substantially all of the ERO business and as such at that point the relevant assets and liabilities were classified as held for sale. At that time, as a major line of the Group's business, the ERO operations were also classified as a discontinued operation.  ERO Middle East is not classified as a discontinued operation as it intended for these operations to be closed.

 

ERO was not previously classified as held for sale or as a discontinued operation. The comparative consolidated profit or loss and other comprehensive income has been restated to show the discontinued operation separately from continuing operations. Following its classification as held for sale the asset group is held at its net book value.

 

 

Results of ERO discontinued operations

 

 

 

 

Six months ended 30 June 2018

 

 

Six months ended 30 June 2017

 

 

 

Year ended 31 December 2017

 

 

Underlying1

Exceptional and other Items

Total

Underlying1

Exceptional and other Items

Total

Underlying1

Exceptional and other Items

Total

 

 

Note

$m

$m

$m

$m

$m

$m

$m

$m

$m

 

 

 

 

 

 

 

 

 

 

Revenue

2

257.6

-

257.6

246.9

-

246.9

513.3

-

513.3

Cost of sales

 

(219.6)

-

(219.6)

(214.4)

-

(214.4)

(443.6)

-

(443.6)

Gross profit

 

38.0

-

38.0

32.5

-

32.5

69.7

-

69.7

Distribution costs

 

(14.2)

-

(14.2)

(12.3)

-

(12.3)

(24.0)

-

(24.0)

Administrative expenses

 

(16.1)

-

(16.1)

(16.4)

-

(16.4)

(33.8)

-

(33.8)

Restructuring costs

 

-

(1.1)

(1.1)

-

(3.7)

(3.7)

-

(5.6)

(5.6)

Other operating income

 

-

-

-

0.2

-

0.2

0.6

-

0.6

Operating (loss)/profit incl. group charges

 

7.7

(1.1)

6.6

4.0

(3.7)

0.3

12.5

(5.6)

6.9

Elimination of internal group charges

 

5.7

-

5.7

5.6

-

5.6

11.6

-

11.6

Operating (loss)/profit

2

13.4

(1.1)

12.3

9.6

(3.7)

5.9

24.1

(5.6)

18.5

Impairment and other charges on classification as held for sale 2

 

-

(5.0)

(5.0)

-

-

-

-

-

-

Finance costs

 

(0.5)

-

(0.5)

(0.2)

-

(0.2)

(0.6)

-

(0.6)

(Loss)/profit before tax

 

12.9

(6.1)

6.8

9.4

(3.7)

5.7

23.5

(5.6)

17.9

Tax (expense)/credit

 

(2.6)

1.1

(1.5)

(3.1)

1.3

(1.8)

(0.9)

6.3

5.4

(Loss)/profit for the period

 

10.3

(5.0)

5.3

6.3

(2.4)

3.9

22.6

0.7

23.3

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

Equity holders of BBA Aviation plc

 

10.3

(5.0)

5.3

6.3

(2.4)

3.9

22.6

0.7

23.3

Non-controlling interests

 

-

-

-

-

-

-

-

-

-

(Loss)/profit for the period

 

10.3

(5.0)

5.3

6.3

(2.4)

3.9

22.6

0.7

23.3

 

 

 

 

 

 

 

 

 

 

 

 

                                     

 

Earnings per share

Note

Adjusted1

 

Unadjusted

Adjusted1

 

Unadjusted

Adjusted1

 

Unadjusted

 

 

 

 

 

 

 

 

 

 

 

Basic

5

1.0¢

 

0.5¢

0.6¢

 

0.4¢

2.2¢

2.3¢

Diluted

5

1.0¢

 

0.5¢

0.6¢

 

0.3¢

2.2¢

2.3¢

                                         

1 Underlying profit and adjusted earnings per share is stated before exceptional and other items.

2 The impairment of $5.0 million reported in exceptional and other items includes $nil million impairment of net assets held for sale to fair value less costs to sell and $5.0 million of costs to sell incurred to date.

All alternative performance measures are reconciled to IFRS measures and are explained in note 17.

 

 

14         Discontinued operations - continued

 

Effect of the disposal group on the financial position of the Group as at 30 June 2018.   The comparative figures have been included for information only and do not represent net assets held for sale at the comparative balance sheet dates.

 

 

 

30 June

2018
$m

30 June

2017
$m

31 December

2017
$m

Assets held for sale

 

 

 

 

Non-current assets

 

 

 

 

Other intangible assets

 

17.4

20.6

19.0

Property, plant and equipment

 

77.7

 76.3

63.5

 

 

95.1

96.9

82.5

Current assets

 

 

 

 

Inventories

 

150.6

142.1

140.7

Trade receivables

 

 111.9

 103.5

96.4

Other receivables

 

9.0

7.9

13.2

Cash and cash equivalents

 

 2.4

 2.7

1.7

 

 

273.9

256.2

252.0

Total assets held for sale

 

369.0

353.1

334.5

 

 

 

 

 

Liabilities held for sale

 

 

 

 

Current liabilities

 

 

 

 

Trade payables

 

(75.9)

(78.4)

(92.7)

Other payables

 

(28.2)

(21.4)

(28.5)

Provisions

 

 (1.1)

(1.1)

 (1.1)

 

 

(105.2)

(100.9)

(122.3)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

 

 (3.0)

(3.0)

(3.0)

Other payables

 

 (0.4)

(1.5)

 (0.4)

Provisions

 

(0.9)

 (1.1)

 (0.9)

 

 

 (4.3)

 (5.6)

(4.3)

Total liabilities held for sale before tax

 

(109.5)

 (106.5)

(126.6)

Net assets held for sale

 

 259.5

246.6

207.9

 

The net assets of the ERO business held for sale as at 30 June 2018 exclude deferred tax liabilities of $10.6 million which remain within the Group tax position.

 

Cash flows (used in)/from ERO discontinued operations

 

 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended
 31 December 2017

 

 

$m

$m

$m

 

 

 

 

 

Net cash (outflow)/inflow from operating activities

 

(29.9)

(18.0)

31.4

Net cash (outflow)/inflow from investing activities

 

(11.5)

(4.2)

1.1

Net cash inflow/(outflow) from financing activities

 

42.1

22.1

(33.6)

Net cash inflow/(outflow) for the period

 

0.7

(0.1)

(1.1)

 

14         Discontinued operations - continued

 

It was announced on 16 September 2016 that the Group had reached agreement with John Menzies plc ("Menzies") on the terms of the sale of ASIG, a leading commercial aviation services company, for $202 million in cash. On 31 January 2017 the Group announced the completion of the sale and that all the terms of the transaction remain as outlined in the announcement made on 16 September 2016.

 

As a major line of the Group's business the ASIG operations were classified as a discontinued operation.

 

 

Results of ASIG discontinued operations

 

 

 

 

 

Six months ended 30 June 2018

 

 

Six months ended 30 June 2017

 

 

 

Year ended 31 December 2017

 

 

Underlying1

Exceptional and other Items

Total

Underlying1

Exceptional and other Items

Total

Underlying1

Exceptional and other Items

Total

 

 

Note

$m

$m

$m

$m

$m

$m

$m

$m

$m

 

 

 

 

 

 

 

 

 

 

Revenue

2

-

-

-

38.2

-

38.2

38.4

-

38.4

Cost of sales

 

-

-

-

(35.7)

-

(35.7)

(35.9)

-

(35.9)

Gross profit

 

-

-

-

2.5

-

2.5

2.5

-

2.5

Distribution costs

 

-

-

-

-

-

-

-

-

-

Administrative expenses

 

-

-

-

(2.7)

-

(2.7)

(2.7)

-

(2.7)

Other operating income

 

-

-

-

-

-

-

-

-

-

Other operating expenses

 

-

-

-

-

-

-

-

-

-

Operating loss incl. group charges

 

-

-

-

(0.2)

-

(0.2)

(0.2)

-

(0.2)

Elimination of internal group charges

 

-

-

-

-

-

-

-

-

-

Operating loss

2

-

-

-

(0.2)

-

(0.2)

(0.2)

-

(0.2)

Impairment and other charges on classification as held for sale

 

-

-

-

-

(6.6)

(6.6)

-

(6.6)

(6.6)

Investment income

 

-

-

-

-

-

-

-

-

-

Finance costs

 

-

-

-

-

-

-

-

-

-

Loss before tax

 

-

-

-

(0.2)

(6.6)

(6.8)

(0.2)

(6.6)

(6.8)

Tax (expense)/credit

 

-

-

-

-

(25.3)

(25.3)

0.2

(15.9)

(15.7)

Loss for the period

 

-

-

-

(0.2)

(31.9)

(32.1)

-

(22.5)

(22.5)

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

Equity holders of BBA Aviation plc

 

-

-

-

(0.2)

(31.9)

(32.1)

-

(22.5)

(22.5)

Non-controlling interests

 

-

-

-

-

-

-

-

-

-

Loss for the period

 

-

-

-

(0.2)

(31.9)

(32.1)

-

(22.5)

(22.5)

 

 

 

 

 

 

 

 

 

 

 

 

                                     

 

Earnings per share

Note

Adjusted1

 

Unadjusted

Adjusted1

 

Unadjusted

Adjusted1

 

Unadjusted

 

 

 

 

 

 

 

 

 

 

 

 

Basic

5

-

 

-

-

 

(3.1)¢

-

(2.2)¢

 

Diluted

5

-

 

-

-

 

(3.1)¢

-

(2.2)¢

 

                                           

1 Underlying profit and adjusted earnings per share is stated before exceptional and other items.

All alternative performance measures are reconciled to IFRS measures and are explained in note 17.
 

 

14         Discontinued operations - continued

 

Cash flows (used in)/from ASIG discontinued operations

 

 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended
 31 December 2017

 

 

$m

$m

$m

 

 

 

 

 

Net cash outflow from operating activities

 

-

(24.8)

(33.4)

Net cash inflow from investing activities

 

-

0.2

-

Net cash outflow for the period

 

-

(24.6)

(33.4)

 

 

 

 

 

             

 

15         Share capital

 

Ordinary share capital as at 30 June 2018 amounted to $509.3 million (30 June 2017: $508.8 million; 31 December 2017: $509.0 million).  During the period the Group issued 0.7 million (30 June 2017: 0.5 million; 31 December 2017: 0.4 million) ordinary shares to satisfy options exercised and the vesting of share awards under the Group's various share schemes.  The consideration for shares issued in respect of share options was $0.8 million (30 June 2017: $0.1 million;
31 December 2017: $0.3 million). 

The number of shares in issue as at 30 June 2018 was 1,046.2 million (30 June 2017: 1,045.4 million; 31 December 2017: 1,045.3 million). 

 

 

16         Post balance sheet events

 

On 1 July 2018 the Group completed an acquisition of fuel services partner EPIC Aviation LLC doing business as EPIC Fuels ("EPIC") for a cash consideration of $88.1m. EPIC is a leading fuel and fuel related services supplier providing fuel and fuel related services at 208 privately owned independent FBO locations.

 

 

17         Alternative performance measures

 

Introduction

The directors assess the performance of the Group using a variety of alternative performance measures and principally discuss the Group's results on an 'adjusted' and/or 'underlying' basis. These terms are consistently used throughout the results announcement. 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 rationales behind using these measures.

 

The alternative performance measures that are used 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 and other items in the current and/or prior years include costs relating to significant acquisitions/disposals of significant businesses and investments, significant business restructuring programmes some of which span multiple years, 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 also treated as exceptional and other items. Other items include amortisation of intangible assets arising on acquisition and valued in accordance with IFRS 3. These charges are presented separately to improve comparability of the Group's underlying profitability with peer companies.

 

Exceptional and other items are disclosed and reconciled to the nearest GAAP Measure in note 3 to the Consolidated Financial Statements.

 

 

17         Alternative performance measures - continued

 

 

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.  Organic revenue growth for ERO and Ontic exclude the impact of fuel price fluctuations as these businesses are not exposed to fuel price fluctuations.

 

A reconciliation from the growth in reported revenue, the most directly comparable IFRS measures, to the organic revenue growth, is set out below.

 

Six months ended 30 June 2018

$m

Restated

Six months ended 30 June 2017 

$m

Restated

Year ended 31 December 2017

$m

Reported revenue prior period (continuing and discontinued)

1,183.7

1,229.4

2,565.9

     Revenue prior year (continuing)

898.6

751.8

1,611.4

     Revenue prior year (ERO discontinued)

Revenue prior year (ASIG discontinued)

246.9

38.2

268.8

208.8

537.7

416.8

Less: Impact for foreign exchange1

11.9

(9.2)

(5.3)

Less: Impact for fuel price fluctuations2

70.8

52.2

90.7

Less: Contribution from discontinued/disposals

(285.1)

(477.6)

(954.5)

Rebased comparative revenue

981.3

     794.8

1,696.8

 

 

 

 

Reported revenue current period (continuing and discontinued)

1,281.9

1,183.7

2,409.0

Less: Contribution from discontinued/disposals

(257.6)

(285.1)

(551.7)

Less: Contribution from acquisitions

(5.0)

(74.0)

(92.7)

Organic revenue current period

1,019.3

824.6

1,764.6

 

 

 

 

Organic revenue growth from continuing operations

3.9%

3.7%

4.0%

1 Impact from foreign exchange is calculated based on the prior year revenue translated at the current year exchange rates.

2 Impact from fuel price fluctuations is calculated based on the prior year revenue recognised at the current year fuel prices.

 

 

17         Alternative performance measures - continued

 

Underlying operating profit and margin

Underlying operating profit and margin are measures which seek to reflect the underlying performance of the Group that will contribute to long-term sustainable profitable growth. As such they exclude the impact of exceptional and other items. The directors focus on the trends in underlying operating profit and margins.

 

A reconciliation from operating profit, the most directly comparable IFRS measure, to the underlying operating profit and margin, is set out below.

 

 

Six months ended 30 June 2018

Total

$m

Six months ended 30 June 2018 Continuing

$m

 

 

 

Six months ended 30 June 2018 Discontinued $m

Six months ended 30 June 2017

Total

$m

Restated Six months ended 30 June 2017 Continuing

$m

 

 

Restated Six months ended 30 June 2017 Discontinued $m

Year ended 31 December 2017  

Total

$m

Restated Year ended 31 December 2017 Continuing

$m

 

Restated Year ended 31 December 2017 Discontinued $m

Operating profit

5.7

18.3

Add: Exceptional and other items:

 

 

 

 

 

 

 

 

 

Amortisation of intangible assets arising on acquisition and valued in accordance with IFRS 3

-

93.8

Acquisition related transaction costs

-

0.1

Restructuring costs

3.7

28.0

Others

-

1.1

Exceptional and other items

Underlying operating profit

9.4

Revenue

285.1

Underlying operating margin (%)

3.3%

 

17         Alternative performance measures - continued

 

EBITDA and Underlying EBITDA

In addition to measuring the financial performance of the Group and lines of business based on underlying operating profit, the directors 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.

 

The directors consider EBITDA and underlying EBITDA to be useful measures of the Group's operating performance because they approximate the underlying operating cash flow by eliminating depreciation and amortisation. EBITDA and underlying EBITDA are not direct measures of the Group's liquidity, which is shown in the condensed consolidated cash flow statement, and should be considered in the context of the Group's financial commitments.

 

A reconciliation from profit or loss to EBITDA and underlying EBITDA, is set out below.

 

 

Six months ended 30 June 2018

Total

$m

Six months ended 30 June 2018 Continuing

$m

 

 

Six months ended 30 June 2018 Discontinued $m

 

Six months ended 30 June 2017

Total

$m

Restated

Six months ended 30 June 2017 Continuing

$m

 

Restated

Six months ended 30 June 2017 Discontinued $m

Year ended

 31 December 2017   

Total

$m

Restated

 Year ended

 31 December 2017   Continuing

$m

 

Restated

Year ended 31 December 2017 Discontinued

$m

Profit/(loss) for the period

66.7

61.4

5.3

52.5

80.7

(28.2)

119.3

118.5

0.8

Add: Finance costs

27.7

27.2

0.5

32.4

32.2

0.2

65.3

64.7

0.6

Less: Investment income

(0.3)

(0.3)

-

(1.0)

(1.0)

-

(3.2)

(3.2)

-

Add: Tax charge/(credit)

16.3

14.8

1.5

32.2

5.1

27.1

49.4

39.1

10.3

Add: Depreciation and amortisation

85.0

81.3

3.7

89.8

86.0

3.8

181.3

173.4

7.9

Add: Impairment and other charges

17.8

12.8

5.0

6.6

-

6.6

6.6

-

6.6

EBITDA

213.2

197.2

16.0

212.5

203.0

9.5

418.7

392.5

26.2

Add: Exceptional and other items:

 

 

 

 

 

 

 

 

 

Restructuring costs

8.8

7.7

1.1

5.3

1.6

3.7

28.0

22.4

5.6

Other

-

-

-

-

-

-

1.1

1.1

-

Acquisition related transaction costs and others

-

-

-

-

-

-

0.1

0.1

-

Underlying EBITDA

222.0

204.9

17.1

217.8

204.6

13.2

447.9

416.1

31.8

 

 

 

17         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 measures, to the underlying profit before tax, is set out below.

 

Six months ended 30 June 2018  

Total

$m

Six months ended 30 June 2018 Continuing

$m

 

 

 

Six months ended 30 June 2018 Discontinued $m

Six months ended 30 June 2017

Total

$m

Restated Six months ended 30 June 2017 Continuing

$m

 

 

Restated

Six months ended 30 June 2017 Discontinued $m

Year ended 31 December 2017

Total

$m

Restated Year ended 31 December 2017 Continuing

$m

 

Restated Year ended 31 December 2017 Discontinued

$m

Profit/(loss) before tax

(1.1)

11.1

Exceptional and other items excluding tax effect

Underlying profit before tax

9.2

298.3

 

 

Underlying deferred tax

Cash adjusted basic and diluted earnings per ordinary share set out in note 5 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 measures, to the underlying deferred tax, is set out below:

 

 

Six months ended 30 June 2018  

Total

$m

Six months ended 30 June 2018 Continuing

$m

 

 

 

Six months ended 30 June 2018 Discontinued $m

Six months ended 30 June 2017

Total

$m

Restated Six months ended 30 June 2017 Continuing

$m

 

 

Restated

Six months ended 30 June 2017 Discontinued $m

Year ended 31 December 2017

Total

$m

Restated Year ended 31 December 2017 Continuing

$m

 

Restated Year ended 31 December 2017 Discontinued

$m

Deferred Tax (credit)/charge

Deferred tax charge/(credit) on exceptional and other items

Underlying deferred tax charge/(credit)

47.7

 

 

 

17         Alternative performance measures - continued

 

Adjusted and cash earnings per share

As set out in note 5 adjusted earnings per share is calculated using basic earnings, adjusted to exclude exceptional and other items net of tax. This earnings measure is further adjusted to exclude deferred tax in arriving at earnings for cash earnings per share.

 

A reconciliation from the basic and diluted earnings per ordinary share, the most directly comparable IFRS measures, to the cash basic and diluted earnings per ordinary share, is set out below.

 

 

Six months ended 30 June 2018 Total

¢

Six months ended 30 June 2018 Continuing

¢

 

 

Six months ended 30 June 2018 Discontinued ¢

Six months ended 30 June 2017 Total

¢

Restated Six months ended 30 June 2017 Continuing

¢

 

 

Restated Six months ended 30 June 2017 Discontinued ¢

Year ended 31 December 2017

Total

Total

¢

Restated Year ended 31 December 2017 Continuing

¢

 

Restated Year ended 31 December 2017 Discontinued ¢

Basic earnings per share

6.5

6.0

0.5

5.1

7.8

(2.7)

11.6

11.5

0.1

Adjustments for adjusted measure

6.5

5.9

0.6

9.2

5.6

3.6

17.0

15.2

1.8

Cash basic earnings per share

13.0

11.9

1.1

14.3

13.4

0.9

28.6

26.7

1.9

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

6.4

5.9

0.5

5.0

7.8

(2.8)

11.5

11.4

0.1

Adjustments for adjusted measure

6.4

5.9

0.5

9.1

5.4

3.7

16.8

15.0

1.8

Cash diluted earnings per share

12.8

11.8

1.0

14.1

13.2

0.9

28.3

26.4

1.9

 

 

 

 

17         Alternative performance measures - continued

 

Return on invested capital (ROIC)

Measuring ROIC ensures the Group is focused on efficient use of assets, with the target of operating returns generated across the cycle exceeding the cost of holding the assets.

 

ROIC is calculated by dividing the last twelve months underlying operating profit for ROIC by invested capital for ROIC, both of which are at the same exchange rate which is the average of the last 13 months' spot rate. The invested capital for ROIC is calculated by adding net assets for ROIC and net debt for ROIC, both of which are calculated by averaging their respective balance over the last 13 months.

 

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 measures, to invested capital for ROIC, is set out below.

 

 

Six months ended 30 June 2018

Total

$m

Six months ended 30 June 2018 Continuing

$m

 

Six months ended 30 June 2018 Discontinued1 $m

Six months ended 30 June 2017

Total

$m

Year ended 31 December 2017  

Total

$m

Underlying operating profit

Underlying operating profit prior period six months ended December

Adjustments for FX

Underlying operating profit for ROIC

Net assets

1,933.2

Add back impairment made to disposal group

-

Adjustments for FX and averaging

(10.9)

Net assets for ROIC

1,922.3

Borrowings

(1,322.8)

Finance leases

Cash and cash equivalents

153.5

Adjustments for FX and averaging

(175.9)

Less net debt for ROIC

(1,346.5)

Invested capital for ROIC

3,268.8

ROIC (%)

11.0%

1 ROIC for discontinued operations has been calculated excluding $11.7m of support costs borne by the continuing Group.

 

 

 

17         Alternative performance measures - continued

 

Operating cash flow

Operating cash flow is one of the 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 buybacks, acquisitions and disposals, financing costs, tax payments, dividends from associates and the repayment and raising of debt. Operating cash flow is not a measure of the funds that are available for distribution to shareholders.

 

A reconciliation from Group net cash flow from operating activities, the most directly comparable IFRS measure, to adjusted operating cash flow, is set out below.

 

 

Six months ended 30 June 2018

Total

$m

 

Six months ended 30 June 2017 Total

$m

Year ended 31 December 2017   

Total

$m

Net cash flow from operating activities

177.1

121.4

339.0

Less: purchase of property, plant and equipment

(40.1)

(35.9)

(73.4)

Less: purchase of intangible assets

(4.2)

(2.3)

(11.9)

Add: income tax paid

10.2

18.8

41.8

Add: Ontic licences not accounted for under IFRS 3

1.2

-

5.0

Add: proceeds from disposal of property, plant and equipment

0.3

0.3

16.8

Operating cash flow

144.5

102.3

317.3

 

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 reconciled to net cash flow from operating activities, the most directly comparable IFRS measure below.

 

 

Six months ended 30 June 2018

Total

$m

 

Six months ended 30 June 2017

Total

$m

Year ended 31 December 2017   

Total

$m

Net cash flow from operating activities

177.1

121.4

339.0

Dividends received from associates

1.7

1.9

2.4

Purchase of property, plant and equipment

(40.1)

(35.9)

(73.4)

Purchase of intangible assets1

(3.0)

(2.3)

(6.9)

Proceeds from disposal of property, plant and equipment

0.3

0.3

16.8

Interest received

0.3

0.5

3.3

Interest paid

(21.8)

(29.2)

(60.5)

Interest element of finance leases paid

-

(0.1)

(0.1)

Free cash flow

114.5

56.6

220.6

 

1 Purchase of intangible assets excludes $1.2 million (30 June 2017: $nil million; 31 December 2017: $5.0 million) paid in respect of Ontic licences, not accounted for as acquisitions under IFRS 3 since the directors believe these payments are more akin to expenditure in relation to acquisitions, and are therefore outside the Group's definition of free cash flow.   These amounts are included within purchase of intangible assets on the face of the Cash Flow Statement.

 

 

17         Alternative performance measures - continued

 

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 net cash flow from operating activities.

 

 

Six months ended 30 June 2018

Total

%

 

Six months ended 30 June 2017

Total

%

Year ended 31 December 2017   

Total

%

Cash conversion

113%

83%

134%

 

Net debt

Net debt consists of borrowings (both current and non-current), less cash and cash equivalents and the fair value adjustment on all senior loan notes.

 

Net debt is a measure of the Group's net indebtedness that provides an indicator of the overall balance sheet strength. It is also a single measure that can be used to assess both the Group's cash position and its indebtedness. The use of the term 'net debt' does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities included in this measure.

 

Net debt is considered to be an alternative performance measure as it is not defined in IFRS. The most directly comparable IFRS measure is the aggregate of borrowings (current and non-current), and cash and cash equivalents. A reconciliation from these to net debt is given below.

 

 

As at 30 June 2018

Total

$m

 As at 30 June 2018 Continuing

$m

 

 

 

As at 30 June 2018 Discontinued $m

As at 30 June 2017

Total

$m

Restated

As at 30 June 2017 Continuing

$m

 

 

Restated As at 30 June 2017 Discontinued $m

As at 31 December 2017

Total

$m

Restated

As at 31 December 2017 Continuing

$m

 

Restated As at 31 December 2017 Discontinued $m

Borrowings

(3.0)

(3.0)

Amortisation costs

-

-

Fair value adjustment on private placement notes

-

-

Fair value adjustment on senior loan notes

-

-

Total principal of borrowings

(3.0)

(3.0)

Cash and cash equivalents

2.7

1.7

Total net principal of borrowings

(0.3)

(1.3)

Amortisation costs

-

-

Finance leases

-

-

Net debt

 

 

 

18         Risks and uncertainties

 

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication on page 23 of the annual report for the year ended 31 December 2017. The risks and uncertainties are summarised below: 

 

·      Structural changes in the global economic environment, or cycle fluctuations which drive down B&GA and commercial flying and military expenditure or cause market weakness in the ERO sector.

·      Global terrorist events either in-flight, at or near major airports materially impacting global air travel.

·      Legislative changes causing material increase to cost of B&GA flight relative to alternatives such as commercial flying, road or rail travel.

·      Ongoing competitor activity to replicate market position of Signature network.

·      Ability to attract and retain high-quality and capable people at senior and mid-management levels.

·      Potential liabilities from defects in services and products.

·      Impact of a successful cyber-attack.

·      International or inadvertent non-compliance with company values and legislation, both within BBA Aviation and with trading partners.

·      Environmental exposures.

·      Non-compliance with banking covenants caused by a tighter regulatory environment around sanctions compliance, which is a key condition of the Group's banking covenants.

·      Ability to effectively manage key resources and dependencies across major projects.

·      Changes in tax regulation in both the USA and EMEA could impact the Group's effective tax rate and cash tax liabilities.

 

 

Independent Review Report to BBA Aviation plc

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the consolidated income statement, the consolidated statement of comprehensive (loss) / income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity, and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

Deloitte LLP

Statutory Auditor

London, United Kingdom

31 July 2018

 

 

 

 

 

 


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Half-year Report - RNS