24th June 2004
TRADING STATEMENT
BBA Group Plc today issues a trading statement ahead of its results for the half year ending 30th June 2004, which will be announced on the 2nd September 2004.
Commenting on trading to date Roy McGlone, Chief Executive, said:
"In the first half of 2004 both of our divisions will deliver strong organic growth compared to the first half of 2003. Despite higher raw material prices in our Materials Technology division and a weaker dollar, we anticipate that pre tax profits* for the group will be ahead of reported pre tax profits for the first half of 2003. We continue to generate strong free cash flow and our interest cover is over 12 times.
"The first half of 2004 has shown improved demand in both our businesses and we anticipate that this will continue through the second half."
Aviation
In Business Aviation the improvements seen in the second half of last year have continued, with strong demand from the fractional operators and improved demand in our traditional markets. In total, first half fuel volumes are expected to be some 12% higher than in the first half of last year.
In Commercial Aviation sales have grown by around 5 per cent over the first half of 2003 as a result of new contracts won during the second half of 2003 and a strong de-icing season. Operating margins in this business sector have remained above 8 per cent.
In the Engine Repair business results were positively influenced by the continuing reduction in pre-owned aircraft inventory, resulting in increased engine inputs and sales grew by some 4 per cent.
Materials Technology
Improving market conditions, particularly in the Industrial sector, and the contributions from new lines installed in 2003 will result in organic growth of more than 10% in the Materials Technology division in the first half. However, a significant increase in raw material costs will impact operating profits by around £3 million in the first half compared to the first half of 2003. Despite this adverse impact, operating profits (on a constant currency basis) should show an improvement over the first half of 2003.
For the second half of the year we anticipate that demand will remain strong and raw material prices are currently forecast to reduce, although, the extent and rate of the reduction remains uncertain.
Financial
The weakness of the US dollar against sterling will have an adverse impact on the translated value of our dollar earnings. In the first half of 2003 the dollar rate used was $1.61 compared to a likely rate of $1.82 for the current year. At the half year this would result in a reduction in the translated value of prior year earnings of £4 million. Despite this adverse impact from currency translation, pre-tax profits* are expected to be ahead of reported pre tax profits for the first half of 2003.
Free cash flow remains strong and should show an improvement over the £28M recorded in the first half of 2003. We expect this trend to continue in the second half.
* Pre-tax Profits before all exceptional items and goodwill amortisation.
Enquiries
Roy McGlone, Group Chief Executive, BBA Group PLC, 020 7514 3999
Andrew Wood, Group Finance Director
Mike Smith, Brunswick, 020 7404 5959
Catherine Bertwistle
Emily Kerr
2004 Interims Results Presentation, 2nd September 2004