28th April 2006
BBA GROUP PLC
BUSINESS UPDATE
Fiberweb Separation
Further to its announcement on 28th February 2006, the Board of BBA today confirms that it is progressing plans to demerge Fiberweb, its materials technology business. Offers which have been received to date for Fiberweb do not, in the view of the Board of BBA, represent sufficient value for shareholders and discussions with potential acquirors have been terminated. BBA has therefore decided to demerge Fiberweb and seek a separate listing for it on the London Stock Exchange. BBA currently expects that this process will be complete during the last quarter of 2006 subject to there being no further significant changes in the trading environment, particularly associated with raw material and energy costs.
Trading Update
Our Aviation business, which now accounts for more than 75% of our operating profits, continues to perform well with performance in Maintenance, Repair and Overhaul improving. We currently anticipate that Aviation’s performance for the year as a whole will be ahead of expectations.
The trading environment for Fiberweb remains challenging and for the first half of 2006 profits will be substantially lower than in 2005, principally due to higher energy and polypropylene costs, together with lower volumes in the North American hygiene business. We expect that the second half will benefit significantly from the start up of the two lines relocated from our Toronto facility, which was closed at the end of 2005, and an improvement in efficiency from productivity initiatives instigated from mid-2005. For the year as a whole we anticipate that the performance of Fiberweb will be below the prior year.
Fiberweb Restructuring
The Board continues to see substantial opportunities for performance improvement. In order to realise the full potential of Fiberweb’s North American hygiene business, a further restructuring of this business will be undertaken. The restructuring will involve the closure of a number of lines with an associated reduction in workforce and builds on the process started in the second half of 2005 when the Toronto site was closed and its production lines relocated to Mexico and Berlin.
The cash cost of the restructuring announced today will be £4m, mostly associated with the severance of employees. We anticipate savings of more than £6m in a full year once the project has been fully implemented by the end of 2006. In addition, there will be a non-cash asset write down of some £22m associated with the line closures. We estimate that the payback on the cash expenditure will be less than 18 months and will lead to a substantially more efficient, lower cost operation serving the North American hygiene market.
Commenting on these announcements, Michael Harper, Chief Executive of BBA, said:
“We believe that the demerger of Fiberweb is in the best interests of our shareholders, despite the difficult trading conditions and our lower expectations for its contribution to the current year. Following the conclusion of discussions regarding a possible sale, we are now focused on achieving the demerger during the last quarter of 2006. We continue to address the issues of improving performance and we are announcing today a further restructuring of our North American hygiene business which will result in a substantially more efficient and lower cost operation.
Our Aviation businesses continue to perform well and for the year as a whole should be ahead of expectations.”
Contacts
BBA Tel: +44 (0) 20 7514 3999
Michael Harper, Chief Executive
Andrew Wood, Finance Director
Brunswick Group LLP Tel: +44 (0) 20 7404 5959
Mike Smith
Kate Holgate
Lucie Anne Brailsford
Ends
2005
Preliminary Results Presentation, 28th February 2006