22nd December 2003
BBA GROUP Trading Update
BBA Group PLC today issues a trading statement ahead of its results for the year ending 31st December 2003, which will be announced on the 25th February 2004.
Commenting on the trading to date Roy McGlone, Group Chief Executive, said:
'I am pleased to be able to report that, as previously anticipated, trading for the second half of the year has shown good progress over the first half and we are therefore on track to deliver results (in constant currency) broadly in line with our expectations. Free cash flow has increased substantially during the second half and interest cover remains strong at more than seven times.'
Aviation Services
In Business Aviation, fuelling volumes continued to increase during the second half compared to the corresponding period of last year. As a result of this improved performance, fuelling volumes for the year as a whole should be slightly higher than last year despite a 6% fall in the first half compared to the first six months of 2002.
In Commercial Aviation, forecast revenue from our seasonal de-icing services is currently in line with our expectations.
As anticipated, the second half performance of our Engine Repair business has shown an improvement over the first half of 2003 as overhauls delayed from the first half start to come through. Premier Turbines, which was acquired in May, has performed to expectations.
We anticipate that operating margins for our Aviation division in the second half will show an improvement over the first half.
Materials Technology
In our Nonwovens business, we have also seen an improved performance in the second half of the year.
In the Industrial sector, the commissioning of the new line at Bethune to support the new Wipes contract took slightly longer than originally anticipated, but has now ramped up and is running close to full capacity. The integration of Tecnofibra, acquired in September, is under way and the business is performing to expectations.
Demand in the Hygiene markets remains stable with no significant change to the pricing environment. There has been some increase in volumes in North America as we have overcome the product qualification issues experienced in the first half of the year.
Polypropylene prices have reduced by 15% since their peak in April but have stabilised at these levels rather than continuing to fall as we had originally expected.
We anticipate that operating margins for this division in the second half will be similar to the first half.
Financial
The recent weakening of the US dollar against sterling will result in an adverse translation impact on profits of approximately GBP 2m compared to the exchange rates used at the time of our interim results announced in September.
Free cash flow remains strong and for the year will show significant progress from the GBP 28m reported at the half year. Debt levels will be similar to those reported at the end of the first half (circa GBP 535m) after funding GBP 30m in respect of acquisitions made during the second half of 2003.
Reorganisation and rationalisation costs for the full year are anticipated to be around GBP 12m (first half GBP 4m) due to the implementation of a number of new initiatives in the second half, the benefits of which will be realised in 2004.
The pilot training market continues to suffer since the events of September 11th and we do not now anticipate any meaningful recovery in the short term. We have therefore reviewed the carrying value of goodwill associated with our pilot training business at Oxford (total GBP 40m) and will make a non-cash impairment charge of approximately GBP 25m in the 2003 accounts.
Outlook
In 2004 we expect to be able to build on the improved trading performance achieved during the second half of 2003 with the anticipated benefit of an improving world economy, a full year's contribution from acquisitions and new contracts effected this year. We also anticipate stronger free cash flow next year with reducing capital expenditure; however the translation of dollar earnings will continue to be influenced by the relative weakness of the dollar versus sterling.
ENQUIRIES:
Roy McGlone, Deputy Chief Executive, BBA Group PLC, 020 7514 3999
Andrew Wood, Group Finance Director, BBA Group PLC, 020 7514 3999
Kevin Byram, Brunswick, 020 7404 5959
2003 Interims Results Presentation, 2nd September 2003