16th December 2002
BBA Group Plc
Trading Update
BBA Group PLC today issues a pre-close trading statement ahead of its full year results ending 31st December 2002, which will be announced on the 4th March 2002.
Commenting on the trading to date Roy McGlone, Group Chief Executive said:
"We anticipate a satisfactory outcome to the year helped by the actions we have taken to strengthen our portfolio and reduce costs. We currently anticipate that normalised pre-tax profits will be within the range of market expectations even though as the year has progressed, we have not seen any improvement in the main markets that we serve, in particular the US. Our balance sheet and cash flows remain strong. Looking to the future we are optimistic that we can continue to gain market share and make further progress."
Aviation Services
In Business Aviation there was some weakening in fuel volumes during the autumn particularly around the anniversary of September 11th and the Thanksgiving holiday. We still anticipate that for the year as a whole (excluding the effect of the closure of Washington National and acquisitions made in 2002 of two new locations at Bedford, Massachusetts and Jacksonville, Florida) underlying volumes will increase by approximately 3% due to the continued strong growth of our Fractional customers and our world leading position in this market place.
Commercial Aviation Services continues to deliver results in line with our expectations with operating margins of circa 9% and operating profits in the 2nd half of the year ahead of the equivalent period in 2001. The seasonal demand for de-icing services is in line with our expectations. We continue to manage our cost base tightly, and have broadened our product offering with the acquisition of Ontario Aircraft Services, which has increased our presence in the growing cargo handling market.
As anticipated our Engine Repair business has shown to date an improved performance in the second half over the first half of 2002, principally due to market share gains.
We are currently reviewing a number of bolt-on acquisitions to strengthen further our aviation services businesses.
We anticipate that operating margins for our Aviation division will remain above 10% for the year as a whole.
Materials Technology
The lack of any meaningful recovery in the US economy has resulted in the industrial markets in Nonwovens remaining fairly flat compared to the first half. Stronger demand in the construction and consumer wipes sectors has been offset by softness in the agricultural and industrial packaging markets.
Demand in the Hygiene markets remains stable. The new air-laid plant in China is ramping up volume and the installation of the new line in the USA to support the major new Wipes contract (sales per annum £30m) is on schedule to commence production in the second half of 2003.
Polypropylene costs have increased by approximately 10% compared to the first half and this will have some adverse impact on operating profits during the second half of 2002.
We currently anticipate that operating margins for this division will remain above 13% for the year as a whole.
Financial
Free cash flows remain strong and will show further progress from the £48m declared at the half year. Debt levels will be similar to those reported at the end of the first half (circa £500m) despite funding £25M in respect of acquisitions made during the second half of 2002. The Group has replaced the £300m loan facility, which was due to expire in June 2003, with another facility for the same amount. This new facility, which was subscribed by a group of 12 banks, matures in November 2007 and provides us with the headroom and flexibility to continue to capitalise on acquisition and other investment opportunities as they arise.
The Group has recently concluded the renewal of its principal insurance policies. This has resulted in a 30% increase in annual premia, somewhat above our expectations, and this will have some impact on our results for both 2002 and 2003. For 2002 the impact will be restricted to the last quarter.
Outlook
The economic environment remains challenging. However we are well positioned in the markets we serve with a tightly controlled cost base, strong cash flows and a healthy balance sheet. Looking to the future we remain optimistic that we can continue to gain market share and make further progress.
Enquiries
Roy McGlone, Group Chief Executive, BBA Group PLC, 020 7514 3990
Mike Smith /Catherine Bertwistle, Brunswick Group, 020 7404 5959
2004 Preliminary Results Presentation, 23rd February 2005