18th December 2001
BBA GROUP PLC PRE-CLOSE TRADING STATEMENT
BBA Group PLC today issues a pre-close trading statement ahead of its year ending 31 December 2001. Such statements will be issued in future in June and December prior to the half and full year close period. The Group's preliminary full year results will be announced in early March 2002.
Roy McGlone, Chief Executive, said:
"Against a backdrop of poor global economic conditions, this has been a challenging half year for BBA. However, we have taken the initiative by aggressively reducing costs, forming new alliances, acquiring businesses and gaining market share. Our balance sheet remains strong and we have demonstrated that we are capable of generating strong operating cash flows."
"We have two market leading businesses and I remain convinced that we will emerge from this difficult period stronger than many of our competitors and in a position to capitalise on opportunities as they arise."
Aviation Services
The terrorist attack on September 11th resulted in the closure of airspace in the USA for several days, which affected both our Corporate and Commercial businesses. Since the airspace re-opened we have experienced varying levels of restriction at Newark, La Guardia, Chicago and Washington National airports. The one-off impact on operating profits for 2001 of the closure of the airspace is in the region of £4m, which reflects the operating costs of our bases during closure.
In the US Commercial business, revenue has fallen by approximately 20% since September 11th. In response, we have cut costs by reducing the workforce by 15%. The mild winter has further impacted revenues, with lower than usual demand for our de-icing services. The integration of ASIG is proceeding well and our original cost reduction targets are being met.
In Corporate Aviation (Signature), overall volumes have largely recovered to pre-September 11th levels with the exception of our base at Washington National, which remains closed to corporate traffic, although we anticipate that it will reopen in early 2002. Security arrangements have been tightened on all our bases and this has increased operating costs by approximately £4m in a full year. We remain confident that the key benefits of Corporate Aviation, security and timesaving, will result in increasing demand during 2002.
In our US Engine Overhaul Business, we have seen a modest weakening in revenues as some non-essential engine maintenance was deferred. We believe that this is temporary in nature and there is now evidence that demand has stabilised. In response, we have cut costs by reducing the workforce by 10%.
In Europe there has been no material impact on the trading outlook in 2001.
Excluding the above-mentioned one-off impact of the airspace closure and approximately £7m of exceptional costs in respect of the of the headcount reduction, we anticipate that operating profits for Aviation Services will be in the range £85m to £90m for 2001.
We believe that with the markets we serve and our position in those markets, the outlook for the Aviation Services division for 2002 and beyond remains encouraging.
Materials Technology
The Materials Technology division was largely unaffected by the events of September 11th, although recently we have experienced some deferral of orders into 2002 by a small number of customers. Project Excel is on track and has recently been extended to include the closure of more non-strategic capacity in the USA. As a result of this, the exceptional cost associated with Excel is likely to be in the range of £30m to £35m in 2001. Operating profits (pre exceptional items) in the second half of 2001 will be similar to the first half. 2002 should benefit from the cost reduction impact of Project Excel, lower material prices and some improvement in demand as we go through next year.
Finance
Cash flows in the Group remain satisfactory and our balance sheet is strong with debt levels (after deducting the loan note for the sale of Friction of £117m) expected to be in the range of £550m-£600m at the end of the year. Interest costs will be £30m-£32m with interest cover of around five times.
ENQUIRIES:
Roy McGlone, Chief Executive, BBA Group PLC, 020 7842 4900
Andrew Wood, Finance Director
Mike Smith, Brunswick, 020 7404 5959
2004 Preliminary Results Presentation, 23rd February 2005