|Aftermarket Services and Systems||$806.6m||
|Aftermarket Service and Systems|
Revenue increased by 5% on an organic basis
Underlying operating profit
Adjusted earnings per share
BBA Aviation produced another strong set of results in 2011 with good profit conversion and strong cash generation, despite the relatively low growth environment. Our businesses made good operational progress throughout the year; we continued to invest in our employees and their development; we completed seven acquisitions and made additional organic investments to deliver growth and extend key lease terms.
The implementation of a stable, long-term and diversified funding structure, together with the equity placing and the Group’s strong cash generation, positions the Group well for further investment and consolidation to complement our organic growth and continued operational improvement.
We made good strategic progress, adding 9 FBOs in the US, the Caribbean and Europe taking our network to 112 locations. We also acquired the GE Aviation Systems’ fuel measurement business in Cheltenham, giving Legacy Support a platform for further expansion in the UK.
The Group’s net debt and leverage have been reduced to $403.6 million and 1.5 times EBITDA respectively. The combination of absolute facility headroom and leverage headroom means we have ample scope to continue the execution of our growth strategy.
A full year dividend of 13.94c reflects the Board’s continuing confidence in BBA Aviation's prospects for the future.
The Board firmly believes that good corporate governance is a major contributor to the delivery of strong Group operating and financial performance. Our Corporate Governance Statement details the results of the Board’s first externally facilitated effectiveness review.
Susan Kilsby will join the Board on 10 April 2012. Her international M&A experience from her distinguished career in investment banking will bring valuable skills and insights to BBA Aviation.
The Board values the talent and commitment of all employees and would like to thank them for their hard work in 2011. This included making further
progress towards our goal of zero health and safety incidents, with 134 of our sites remaining accident-free during 2011.
We will continue to deliver operational improvement, to flex costs and to deploy our available capital to a strong pipeline of attractive investment and consolidation opportunities.
Whilst the macro-economic climate remains uncertain, we anticipate making further progress in 2012. Over the medium-term, the strengths and track record of our business together with the structural drivers of our markets give us continued confidence in the attractive growth prospects for BBA Aviation and our ability to deliver superior through-cycle returns.
In 2011 organic revenue grew in both divisions, with a particularly strong increase in Aftermarket Services and Systems. Organic revenue growth excludes the impact of foreign currency and fuel price fluctuations and acquisitions and disposals.
Adjusted earnings per share increased by 6%, driven by improvements in operating profit, partially offset by increased interest costs. There was an increased number of shares in issue following a placing in March 2011.
In 2011, cash conversion was once again very strong at 102% with a modest increase in working capital offset by restraint in the level of capital expenditure.
2011 saw a further 110 basis point improvement in ROIC from underlying operating improvements combined with value creating acquisition investments.
Each of our facilities uses Recordable Incident Rate (RIR) as its primary health and safety performance metric. RIR measures the number of full time employees per 100 that sustain a recordable injury or illness. Annual RIR continued to fall in 2011 but at a slower rate as we near our goal of zero incidents.
134 sites achieved an RIR of zero in 2011. This represents an increase in both the absolute number of sites and the proportion of total sites achieving zero RIR compared with 2010.
67% of BBA Aviation's revenue in 2011 was associated with business and general aviation (B&GA).
Worldwide there are more than 17,000 business jets, 12,000 turboprops and 17,000 turbine civil helicopters in operation, with the service demands of operators principally driven by the flying hours of the aircraft they operate and manage.
B&GA is a valued business efficiency tool and, over the long-term, B&GA flying and the industry's long-term structural growth is closely correlated to GDP and anticipated corporate earnings.
Long-term projections for GDP continue to be positive. However, the muted general recovery in North America and Western Europe together with continuing economic uncertainty represent headwinds to short-term growth in B&GA flying. BBA Aviation's businesses support the in-service fleet and therefore flying hours and movements, particularly in North America, are the key indicators of demand.
Whilst 2011 was another year of growth, building on growth in 2011, B&GA Aircraft movements in North America remain 22% below their peak.
Medium-term market indicators such as the number of new jets sold continue to improve. External commentators forecast that 2011 should prove to be a trough in new aircraft sales with a modest recovery expected in 2012 and steadily increasing growth projected for OE sales from 2013-17. It is expected that 10,000 new business jets will be delivered between 2011 and 2020.
27% of BBA Aviation's revenue in 2011 was associated with commercial aviation.
Demand for the services we provide - fuelling, ground handling, technical services and aftermarket support - is driven by commercial aviation movements and the trend towards outsourcing of non-core services.
World airline passenger traffic continued to expand during 2011 and airline flight hours are at an all time high. The geographical shift in capacity continues to move towards areas such as Latin America and Asia Pacific, with modest declines in aircraft movements in both North America and Europe.
6% of BBA Aviation's revenue in 2011 was associated with military aviation, primarily the support of legacy military platforms.
Reductions in defence procurement budgets in the US and Europe are expected to continue with the largest reductions in modernisation programmes. Increased flying for older out-of-warranty equipment is likely to result in service extensions that will require additional maintenance and overhaul support.
Signature Flight Support is the world's largest and market-leading fixed base operation (FBO) network for business aviation with over 100 locations globally. It provides high-quality, full service support for B&GA travel focused on passenger handling and customer amenities such as refuelling, hangar and office rentals, and other technical services.
ASIG is the world's leading independent refueller with operations at 70 airports worldwide. It safely delivers ground support services to commercial airlines including refuelling, baggage handling, equipment maintenance and de-icing with considerable technical expertise by our well trained staff.
Signature’s reported revenue increased by 19% to $946.4 million, with organic growth in North America of 2% matching North American B&GA movements growth of 2%.
Signature expanded its network through the acquisition of FBOs in the US, the Caribbean and Europe. The company also secured lease extensions at four locations and reached agreement with NetJets to build and operate a dedicated private terminal at Palm Beach International Airport. With one disposal, there are now a total of 112 FBOs in Signature's global network, 66 in North America.
Signature made good operational progress in the year, improving the quality of the services it provides and reducing the cost of delivery.
It also continues to look at capital and cost effective ways of extending its network, leading it to launch Signature Select™, a programme offering independent FBOs the ability to use the Signature Select™ badge at the end of 2011.
A Dassault Falcon 900 awaiting inspection in one of Signature’s
In ASIG revenue increased by 9% to $383.7 million. ASIG was successful in winning a number of new contracts throughout the year supporting its 2% organic growth despite commercial movements being down 1% for North America and Europe. ASIG also saw a strong contribution from the 2010 SGS acquisition.
ASIG launched new refuelling and fuel facility management services at Klagenfurt and Linz, Austria and, in the US, began refuelling and ground service operations at Orlando Sanford International Airport. ASIG also entered the Latin American market with a 20-year contract for fuel services at Tocumen International Airport in Panama.
Network wide renewals were made with American Airlines and American Eagle at 15 airports, US Airways and US Airways Express at 26 airports and Delta at 24 airports. ASIG’s ground handling business had a number of contract wins in 2011 including the provision of comprehensive ground services for TAM at JFK.
ASIG fuels a Boeing 747 at Los Angeles International Airport. Across its global network, ASIG fuels approximately 10,000 flights per day and handles 20 billion gallons of jet fuel per annum.
Engine Repair and Overhaul (ERO) is a leading independent OEM authorised engine repair company, authorised to work on 80% of the engines powering the B&GA fleet.
Legacy Support is the leading provider of high-quality, cost effective solutions in the continuing support of maturing aerospace platforms to the major aerospace OEMs and airframe operators.
APPH is a niche landing gear and hydraulic sub-systems manufacturer, designing, engineering, manufacturing and supporting systems and sub-systems for original equipment and aftermarket applications.
Revenue in ERO increased by 15% to $613.0 million all of which was organic. With the normal 6-9 month lag to flight activity, overhaul activity initially benefited from the 10% increase in B&GA movements in North America in 2010.
ERO continued its strategic development with field service expansion in South America and Asia Pacific. Honeywell TFE731 major periodic inspection capabilities were brought on-line at the regional turbine centre in Brazil and an RTC was established in Singapore which opened in early 2012. F1RST SUPPORT™, ERO’s state-of-the-art control centre for customer support continued to lead in on-wing field service.
In addition to its Dallas headquarters ERO opened control centres in Portsmouth, UK in 2011 and in Singapore in early 2012. Together the three centres establish an around the clock response network providing rapid service to customers anywhere in the world.
An auxiliary power unit undergoing a detailed “off-wing” inspection by a specialist ERO technician inside one of the F1RST SUPPORT™ vehicles.
Legacy Support’s revenue grew by 52% to $130.1 million. 11% of growth was organic, largely relating to complex landing gear sales to the US Government and first deliveries of environmental control units for the F-15 weapons guidance systems. The remaining revenue growth is related to eight months of contribution from the GE Aviation Systems’ fuel measurement business acquired in May 2011 and represents an outperformance relative to our original expectations.
The integration of the fuel measurement business is progressing well and the establishment of the Cheltenham facility, together with the existing Slough facility, strengthens the foundation for expansion of the Legacy Support licensing proposition into the UK.
Ontic obtained two new licences in the year, and the order book continued to grow to a record $103 million including orders for the fuel measurement business which has parts on the growing Boeing 777 and Airbus A320 fleets.
Legacy Support’s growing electronics capability is supported by an expanded electronics manufacture and repair area at its Chatsworth facility.
Revenue in APPH declined by 6% to $63.5 million with the rate of decline moderating in the second half. Notwithstanding the reduction in activity in 2011, APPH made good progress on OEM orders for the Agusta Westland AW159 military helicopter and the BAE Systems’ Hawk trainer aircraft, which are due for delivery in 2012.
The recent Government defence platform rationalisation has had only a limited impact on the order book and our portfolio is well balanced across civil, military and regional programmes and also from an OEM versus aftermarket perspective.
APPH also moved forward with development of the landing gear for the new Saab Gripen NG fighter aircraft.
APPH remains focused on driving operational improvement, together with optimising its footprint and cost base. It has recently announced the possible closure of its Basingstoke facility and transfer to Runcorn of the component repair and overhaul capability to support its in-house needs.
A Saab Jas39 Gripen nose landing gear awaiting quality assurance clearance before being dispatched to a
BBA Aviation delivered continued growth in profitability, strong cash generation and further good strategic progress.
BBA Aviation provides services to operators of B&GA, Military and Commercial aircraft.
Delivers refuelling, ground handling and other services to the B&GA and commerical aviation markets.
Service and Systems
Services, manufactures and supports engines and aerospace components, sub-systems and systems.