27th June 2003
BBA GROUP PLC Trading Update
BBA Group Plc today issues a pre-close trading update ahead of its half-year ending 30th June 2003. The Group's half-year results will be announced on 2nd September 2003. Commenting on first half trading, Roy McGlone, Chief Executive, said:
"As previously announced, the trading environment for the first half has been challenging due, in particular, to the direct and indirect impacts of the war in the Middle East, significantly higher raw material costs and the recent weakening of the dollar against sterling. Accordingly pre-tax profit (before goodwill amortisation and all exceptional items) for the first six months of the year will be slightly lower than the equivalent period last year on a constant currency basis (2002 re-stated: £65m).
We have, however, seen some improvement in trading during the second quarter including, since May, a reduction in polymer costs. We expect these trends to continue through the second half."
Aviation
As anticipated, the business aviation market was generally softer in the first half. However, demand from the fractional operators continued to grow, albeit at a slower rate than we experienced during 2002. In commercial aviation services, there has been some reduction in schedules since the start of the year, primarily as a result of the effect of the war in the Middle East. As indicated previously we saw a reduction in engine repair and overhaul orders. However, these are expected to improve during the second half, and results over this period will also reflect an initial contribution from the Premier Turbines acquisition.
We continue to work on a number of acquisition opportunities to strengthen further our portfolio of businesses.
Materials Technology
Demand in nonwovens has been stable but margins have been impacted by the significant increase in raw material costs mitigated partly by selling price increases implemented during the second quarter. Input costs have now started to reduce and this trend is expected to continue during the second half.
We are on schedule with the installation of the new line to support the previously announced major Wipes contract and will commence volume production in July. This 5-year contract, worth some £30m per annum, will generate approximately £12m of sales during the second half of 2003.
Finance
Capital expenditure in the first six months will be higher than last year due to the completion of the investment in the new nonwovens lines. Despite this we expect the Group to generate positive free cash flow at the half-year. For the year as a whole we expect continued strong free cashflow with capital expenditure similar to last year. We have invested £22m acquiring Premier Turbine for Aviation Services and £44m in the purchase of 21m of our own shares since starting the share buy back programme at the end of March.
Outlook
We anticipate useful progress in the second half compared to the corresponding period last year as benefits of lower raw material costs, recent acquisitions and the start of production on the new nonwovens lines, begin to come through.
ENQUIRIES:
Roy McGlone, Deputy Chief Executive, BBA Group PLC, 020 7514 3999
Andrew Wood, Group Finance Director, BBA Group PLC, 020 7404 5959
Mike Smith, Brunswick, 020 7404 5959
2003 Interims Results Presentation, 2nd September 2003