Annual Report 2013

Annual Report 2013 Contents Strategic Report 01 Industry Acronyms Overview 01 Airbus Corporate Jet ACJ Boeing Business Jet BBJ Our Locations 02 Bureau of Economic Analysis BEA Financial Highlights 04 Business and General Aviation B&GA Revenue Splits 05 Corporate Social Responsibility CSR Chairman’s Statement 06 Engine Repair & Overhaul ERO Federal Aviation Administration FAA Board of Directors and Executive Management 08 Fixed Base Operation FBO Strategic Overview 10 General Aviation Manufacturers Association GAMA Our Vision, Mission and Values 12 Greenhouse Gas GHG Our Strategy 13 Maintenance, Repair & Overhaul MRO Major Periodic Inspection MPI Operating Model 14 Original Equipment Manufacturer OEM Our Markets 15 Recordable Incident Rate RIR Our Goals 17 Regional Turbine Centre RTC Key Performance Indicators 18 Request for Proposal RFP Zero Incident Philosophy and Process ZIPP Our Strengths 20 Our Risks 21

2013 Overview 22 Front cover Our Markets in 2013 23 Customers’ Dassault Falcon 50 Group Financial Summary 26 jets parked safely on Signature’s Flight Support 28 ramp at Boca Raton, Florida — Signature Flight Support 30 — ASIG 34 Aftermarket Services 38 — Engine Repair & Overhaul 40 — Legacy Support 44 — APPH 48 Corporate Social Responsibility 50 Financial Matters 56

Directors’ Report 58 Directors’ Corporate Governance Statement 59 Directors’ Remuneration Report 69 Going Concern 89 Additional Disclosures 90 Statement of Directors’ Responsibilities 92

Consolidated Financial Statements 93 Independent Auditor’s Report 93 Consolidated Income Statement 96 Consolidated Statement of Comprehensive Income 97 Consolidated Balance Sheet 98 Consolidated Cash Flow Statement 99 Consolidated Statement of Changes in Equity 100 Accounting Policies of the Group 101 Notes to the Consolidated Financial Statements 106

Company Financial Statements 141 Company Balance Sheet 141 Accounting Policies of the Company 142 Notes to the Company Financial Statements 144 Principal Subsidiary and Associated Undertakings 149 Five Year Summary 150 Shareholder Information 151 Strategic Report Overview Overview BBA Aviation plc is a market-leading provider of global aviation support and aftermarket services. Our Flight Support businesses provide specialist on-airport support services, including refuelling and ground handling, to the owners and operators of private, business and commercial aircraft. Our Aftermarket Services businesses are focused on the repair and overhaul of gas turbine engines and the service and support of aerospace components, sub-systems and systems. Our businesses have a common vision, mission and set of values. We focus on: consistently exceeding customer expectations; valuing and empowering our people in a zero incident, safe environment; encouraging innovation; working together for greater gain; and always behaving with integrity and respect. This performance is driven by our people who are the foundation of our success and in whom we seek to promote our values of: performance; safety; people; service; responsibility; and integrity, that are a vital and integral part of the way we do business. This consistent, Group-wide focus is fundamental to achieving our overarching objective of delivering exceptional, long-term, sustainable value for all our stakeholders.

BBA complete.indb 1 12/03/2014 12:10 Strategic Report Our Locations Our Locations We operate at over 220 locations on 5 continents, with over 12,000 employees worldwide.

Where we operate BBA Aviation has significant operations in North America, with over 75% of its revenues generated there. North HPN, Westchester America is the primary County Airport, second FBO, business & general aviation signed in 2013 (B&GA) market with 68% CYUL, Montreal of the B&GA fleet based International Airport, acquisition of existing there. It is also the primary Signature Select ™ commercial aviation market location in 2013 with 32% of global commercial aviation movements.

In addition to its North STS, Sonoma County American operations, Airport, added to Signature Select™ in 2013 BBA Aviation has VNY, Van Nuys Airport, operations in Europe, second FBO, added Asia, South America in 2013 and Africa.

PAC, Panama Albrook International Airport, added in 2013

Location Key Key Facts Flight Support Signature Flight Support North America South America ASIG Signature Flight Support + ASIG 68% 9% of world’s business jets of world’s business jets Aftermarket Services Engine Repair & Overhaul 32% 10% Legacy Support of commercial aviation of commercial aviation movements movements Engine Repair & Overhaul + Legacy Support 02

BBA complete.indb 2 12/03/2014 12:10 Strategic Report Our Locations

Flight Support (62% of Group) Flight Support has over 200 locations worldwide, covering geographies with EDDT, Berlin Tegel Airport added in 2013 large numbers of business jets and aircraft movements.

Aftermarket Services (38% of Group) Aftermarket Services has 20 locations worldwide, distributed to support customer requirements.

SIN, Singapore Legacy Support facility added in 2013

KDAB, Singapore Changi International Airport added in 2013

BQH, London Biggin Hill added in 2014

Source: B&GA distribution JetNet Jan 2014 (North America includes Mexico, Caribbean and Central America). Commercial aviation movements OAG Jan 2014 (South America includes Mexico, Europe Africa Asia Oceania Caribbean and Central America). 11% 4% 6% 2% of world’s business jets of world’s business jets of world’s business jets of world’s business jets 24% 3% 28% 3% of commercial aviation of commercial aviation of commercial aviation of commercial aviation movements movements movements movements

0303

BBA complete.indb 3 12/03/2014 12:10 Strategic Report Financial Highlights Financial Highlights

$m 2013 2012 Change (restated)* Revenue 2,218.6 2,178.9 2% Organic revenue growth1 2% (1)% Go to page 18 Underlying EBITDA2 261.6 253.2 Key Performance Indicators Underlying operating profit3 200.1 192.7 Organic revenue growth demonstrated the Group’s Operating profit 169.4 160.0 6% outperformance against our key markets that remained Underlying operating margin4 9.0% 8.8% broadly flat. Underlying profit before tax5 170.5 157.8 8% Profit before tax 145.2 125.1 16% Profit for the period 138.1 110.3 25% Exceptional items6 (7.6) (23.2)

Earnings per ordinary share – basic Adjusted† 30.5¢ 27.9¢ 9% Go to page 18 Unadjusted 28.9¢ 23.1¢ 25% Key Performance Indicators Earnings per ordinary share – diluted Adjusted earnings per share grew by 9% as a result of the Adjusted† 30.1¢ 27.5¢ 9% improvement in underlying operating profit and reduction Unadjusted 28.5¢ 22.7¢ 25% in net interest expense. Dividends per ordinary share 15.40¢ 14.65¢ 5% Return on invested capital7 10.0% 9.8% Cash generated by operations 260.5 212.1 23% Free cash flow8 146.5 121.2 21% Cash conversion9 101% 92% Go to page 18 Net Debt10 (478.5) (416.4) Key Performance Indicators Net debt to underlying EBITDA 1.8x 1.6x Continued good cash conversion of 101% supporting the Group’s significant 1 Organic revenue growth is calculated after adjusting for foreign exchange, fuel price inflation and acquisitions and disposals investment capacity. 2 Underlying EBITDA is calculated as underlying operating profit ($200.1m) before depreciation and amortisation charged through underlying operating profit ($61.5m) 3 Operating profit before exceptional items 4 Operating margin on underlying operating profit 5 Profit before tax excluding exceptional items 6 Exceptional items included within the income schedule are explained in the Financial Matters within the Strategic Report and in line with the Group’s accounting policies included within the financial statements 7 Underlying operating profit return on average invested capital including goodwill and intangibles amortised or written off to reserves 8 Cash generated by operations plus dividends from associates, less tax, interest, preference dividends and net capital expenditure (excluding expenditure on Ontic licences) 9 Cash generated by operations, excluding cash exceptionals, as a percentage of underlying operating profit 10 Book value of borrowings and finance leases less cash and cash equivalents

† Earnings per share before exceptional items

* Restated for IAS 19 as set out in the Accounting Policies of the Group on page 101.

The definitions as outlined above are consistently applied throughout the Strategic Report and the Consolidated Financial Statements.

BBA complete.indb 4 12/03/2014 12:10 Strategic Report Revenue Splits Revenue Splits

Revenue by business

Signature ERO $968.4m $597.8m

Aftermarket Flight Support BBA Aviation Services $1,375.9m $2,218.6m $842.7m

Legacy $168.2m ASIG APPH $407.5m $76.7m

Revenue by key markets

B&GA CommercialCommercial MilitaryMilitary 68% 25%27% 7%6%

Signature $968.3m ASIG $407.5m ERO $35.3m ERO $491.2m ERO $71.4m Legacy $70.9m Legacy $38.7m Legacy $58.6m APPH $44.1m APPH $17.3m APPH $15.3m Total $150.3m Total $1,515.5m Total $552.8m

BBA complete.indb 5 12/03/2014 12:10 Strategic Report Chairman’s Statement Chairman’s Statement

Michael Harper Chairman

BBA Aviation made good progress in 2013, continuing to demonstrate its key strengths. The Group delivered further market outperformance and an improvement in key operating metrics, as well as continuing to effectively execute the Group’s growth strategy.

Results In 2013 the Group delivered a good financial performance with 2% revenue growth to Go to pages 18–19 $2,218.6 million, a 4% increase in underlying operating profit to $200.1 million and a 9% Key performance increase in basic adjusted earnings per share to 30.5 cents. In line with the cash generative Indicators nature of the business we saw continued good cash conversion of 101% and a 21% increase For further detail about our financial KPIs. in free cash flow, supporting the Group’s on-going creation of investment capacity. Return on invested capital increased by 20 basis points to 10.0% despite investment in the year in key expansion projects which are expected to generate superior returns over the longer term.

We continued to make further strategic progress with $150 million of investments supporting the continued expansion of the Flight Support network and the growing portfolio of Aftermarket licences and authorisations.

Organisational change At the beginning of 2013 we consolidated operational management into two divisions: Flight Support and Aftermarket Services. We have been pleased by the Group’s successful transition to this new structure, which has been effective at encouraging cross-business opportunities through sharing best practice, standardising processes and practices and optimising management and support structures. We continue to see good potential for accessing further improvement in 2014 and beyond.

In February 2014 we announced the sale of APPH to Héroux-Devtek Inc for $128 million. Go to page 48 APPH was the only part of BBA Aviation that focused on product design and development, APPH with significant manufacturing activities and a higher fixed cost base than the rest of the For further detail about the disposal of APPH. Group. The disposal enhances the Group’s strategic focus, as well as delivering good value for our shareholders. Further to the disposal of APPH, we intend to return the net cash proceeds to shareholders by way of a $125 million share repurchase programme.

Dividend The Board is proposing a final dividend of 11.00 cents per share (2012: 10.45 cents per share), taking the full year dividend to 15.40 cents per share (2012: 14.65 cents per share). This is a 5% increase and reflects the Board’s progressive dividend policy and continuing confidence in the Group’s medium-term growth prospects.

BBA complete.indb 6 12/03/2014 12:10 Corporate governance and the Board Strategic Report Chairman’s Statement The Board is firmly committed to maintaining high standards in all matters of corporate Go to pages 59–68 governance and believes that good corporate governance is a major contributor to the Corporate Governance delivery of strong Group operating and financial performance. Statement For further detail about how we have applied the principles of During the course of 2013 there were a number of changes to the Board. Hansel Tookes and the UK Corporate Governance Code and the Board’s approach Mark Harper stepped down as non-executive directors to focus on their increasing personal to succession planning. and business commitments. In August we welcomed Wayne Edmunds as a non-executive director and in December we welcomed Sir Nigel Rudd as Deputy Chairman, with the intention that he will succeed me as Chairman following my retirement from the Board in May 2014.

In March 2014 we announced that Mark Hoad, Group Finance Director would be standing down from the Board on 30 June after nine years with the Group. Mark has played an important role in the successful transformation of BBA Aviation into a focused aviation services and aftermarket business and in its continuing strategic and operational progress. We thank him for his significant contribution to the Group over the last nine years and wish him every success for the future.

Employees Our performance in the year reflects the expertise, hard work and commitment of our Go to pages 50–55 people. They are central to BBA Aviation’s on-going success and we are focused on ensuring Corporate Social that they are valued and empowered in a safe and sustainable environment. We continued Responsibility to see good progress against our environmental metrics however, disappointingly, following For more information about how our people put our values into six years of improvement our performance against our key safety metrics plateaued in 2013 action with pride, performing services for customers safely, and our focus is now shifting to behavioural based safety to help engage team members responsibly and with integrity. in safety best practices, culture and behaviours that will in turn help us deliver our goal of zero incidents.

It is with regret that I report that an incident at one of our Signature sites in December resulted in the death of one of the BBA Aviation team. The situation is being investigated by the authorities and we are co-operating fully with that investigation and conducting our own in parallel. Safety is the critical value for BBA Aviation – any incident is a reminder of how vital it is that we all take responsibility to promote a proactive and preventative approach to safety.

Outlook While inputs in ERO are expected to remain subdued in 2014, and growth in Legacy will pause following the completion of several major contracts in 2013, North American B&GA flying, although still volatile, is showing some signs of a recovery. This, together with the incremental contribution from strategic investments already announced, an additional $24m of acquisitions and new licences agreed since year-end, continuing operational improvements and a solid investment pipeline, gives us confidence that 2014 will be another year of progress for BBA Aviation.

Over the longer term, the underlying strengths of our market-leading businesses, the continuing improvement in their operational performance and the structural growth and consolidation in our major markets give us increasing confidence in our ability to generate superior through-cycle returns.

I would like to take this opportunity to express my thanks to my fellow directors and to all at BBA Aviation for what has been a very rewarding nine years with the Company. I am delighted to hand over to such a well-respected and experienced successor and wish BBA Aviation the very best on the next stage of its exciting journey.

Michael Harper Chairman 07

BBA complete.indb 7 12/03/2014 12:10 Strategic Report Board of Directors and Board of Directors and Executive Management Executive Management

Directors

Michael Harper (69) Sir Nigel Rudd (67) Simon Pryce (52) Mark Hoad (43) Chairman Non-Executive Director Group Chief Executive Group Finance Director Appointed to the Board as a Appointed to the Board as Appointed to the Board as Group Appointed to the Board as Group non-executive director in Chairman Designate in December Chief Executive in June 2007. Finance Director in April 2010. February 2005 and became 2013, it is intended that Sir Nigel Simon also chairs the BBA Aviation Mark is a Chartered Accountant. Non-Executive Chairman in June Rudd will succeed Michael Harper Executive Management He joined BBA Aviation as Group 2007. Michael is an engineer by as Chairman in May 2014. Committee. In addition to his Financial Controller in May 2005 training and has a wealth of Sir Nigel is Chairman of Heathrow BBA Aviation plc position, Simon from RMC Group plc where he had experience gained as a director Airport Holdings Limited and a is on the Board of the General worked since 1996 in a number of of Williams plc where, on the Non-Executive Director of Sappi Aviation Manufacturers finance roles, including expanding demerger in 2000, he became Limited. In February 2011, he was Association (GAMA), the US his international business Chief Executive of Kidde plc. He is appointed Chairman of the general aviation trade body, and experience with periods based currently Chairman of Ricardo plc, Business Growth Fund and is Chairman of its International in Germany, Croatia and Australia, a non-executive director of became a Senior Advisor to Affairs Committee. Simon is a where he was Chief Financial QinetiQ Group plc and a Fellow Barclays plc in January 2013. Fellow of the Royal Aeronautical Officer of ASX-listed company of the Royal Aeronautical Society. Sir Nigel has a wealth of Society, a member of the Council Adelaide Brighton. He will retire from the Board at experience at the top of UK of the University of Reading, the AGM on 7 May 2014. industry, including previous a Chartered Accountant and chairmanships of Invensys plc, a member of the Chartered Alliance Boots plc, Pendragon plc, Institute for Securities and Pilkington plc and as founder Investment. He was previously of Williams plc he oversaw its with JP Morgan and Lazards demerger in 2000, creating in London and New York, and Chubb plc and Kidde plc. Sir Nigel GKN plc in a range of international is Chancellor of Loughborough finance and management roles. University, Deputy Lieutenant of Derbyshire and a Freeman of the City of London.

Executive Management

Simon Pryce Mark Hoad Peg Billson Sheena Mackay Group Chief Executive Group Finance Director President and CEO, Group HR Director Aftermarket Services

BBA complete.indb 8 12/03/2014 12:10 Strategic Report Board of Directors and Executive Management

Key to committee members Audit and Risk Committee Nomination Committee Remuneration Committee

Nick Land (66) Susan Kilsby (55) Peter Ratcliffe (65) Wayne Edmunds (58) Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Appointed to the Board in August Appointed to the Board in April Appointed to the Board in January Appointed to the Board in August 2006 and Senior Independent 2012 and became Chairman of 2009. Peter brings to the Board 2013. Wayne is Chief Executive Director and Chairman of the the Remuneration Committee in his experience of working in an of Invensys plc and has extensive Audit and Risk Committee, Nick May 2013. Susan brings to the industry focused on customer commercial experience, was formerly Chairman of Ernst & Board her global investment service, as he was the Chief particularly in the US markets. Young LLP and a member of the banking experience, having Executive Officer of Carnival plc Previously, Wayne was Chief Global Executive Board of Ernst begun her career at The First until April 2003 and Chief Financial Officer of Invensys plc, & Young, positions which he held Boston Corporation and later Executive Officer of the P&O having joined the business in from 1995 to 2006. In addition worked at Bankers Trust and BZW, Princess Cruises division of 2008 as CFO of Invensys Process to his experience as a Chartered before the latter was acquired Carnival Corporation and Carnival Systems. He joined Invensys plc Accountant, Nick brings to the by Credit Suisse. She was plc from 2003 to 2007. He also from Reuters America, Inc. having Board his extensive skills Chairman of the EMEA Mergers brings his significant experience held other senior financial roles as an advisor to international and Acquisitions team at Credit both as an executive and a in the technology sector, businesses. His current Suisse until 2009 and she was non-executive director of UK including 17 years at Lucent appointments include being also a non-executive director and US public listed companies. Technologies, Inc. a non-executive director of of L’Occitane. Her current He was previously an executive Vodafone Group Plc, Ashmore appointments include being director of The Peninsular and Group plc and Alliance Boots Chairman Designate of Shire plc Oriental Steam Navigation GmbH. He is also an adviser to and a non-executive director of Company. He is a Chartered Alsbridge plc, sits on the Financial Coca-Cola HBC AG and Green Accountant and a dual US/UK Reporting Council and chairs the Mountain Coffee Roasters, Inc. citizen. He is currently a board of the Vodafone Group Her experience advising clients non-executive director of Mead Foundation. across a range of industries Johnson Nutrition Company includes significant deals in the and Casa Pacifica Center for aviation and aerospace sectors. Children and Families.

Hugh McElroy Michael Scheeringa Iain Simm President, Group President and CEO, Group General Counsel Business Development Flight Support and Company Secretary

BBA complete.indb 9 12/03/2014 12:10

Strategic Report Strategic Overview Strategic Overview

Our Vision, Mission and Values 12 Our Strategy 13 Operating Model 14 Our Markets 15 Our Goals 17 Key Performance Indicators 18 Our Strengths 20 Our Risks 21

BBA complete.indb 10 12/03/2014 12:10

Strategic Report Strategic Overview

Our Vision BBA Aviation is dedicated to being the world’s leading provider of aviation support and aftermarket services

Our Overarching Objective Delivering exceptional long-term sustainable value for all our stakeholders

Our Approach Strategy Active management of a balanced portfolio of market-leading flight support and aftermarket Performance services businesses with good barriers to entry

Producing above average through-cycle growth in markets with attractive characteristics Growth

£ Disciplined capital management with absolute cash generation and strong cash conversion Cash generation to deliver attractive through-cycle returns

Value creative business investment and consolidation in fragmented markets Value creative investment

Focus — Consistently exceeding customer expectations — Valuing and empowering our people in a zero incident, safe environment — Encouraging innovation — Working together for the greater gain — Always behaving with integrity and respect

Operating Model BBA Aviation sets strategic direction and provides operational oversight to the Flight Support and Aftermarket Services divisions that go to market through their individual brands

Markets B&GA Commercial Aviation Military Aviation

How We Measure Goals A series of short and medium-term specific and measurable goals, aligned Our Success with our mission statements, support the ultimate execution of the strategy

KPIs Progress against our short and medium-term goals is monitored using financial and non-financial indicators

BBA complete.indb 11 12/03/2014 12:10 Strategic Report Our Vision, Mission and Values Our Vision, Mission and Values

Our Vision and Mission BBA Aviation is dedicated to being the world’s leading provider of aviation support and aftermarket services with the overarching objective to deliver exceptional, long-term sustainable value for all our stakeholders.

This objective is shared by all Group businesses, which are individually and collectively Go to page 50 focused on: Corporate Social ——Consistently exceeding customer expectations; Responsibility ——Valuing and empowering our people in a zero incident, safe environment; CSR is embedded in our vision, mission ——Encouraging innovation; and values ——Working together for greater gain; ——Always behaving with integrity and respect.

Our Values Our employees are also unified around a common set of values that are a vital and integral part of the way we do business. Every day we put our values into action with pride.

Integrity Performance We earn the trust and respect of We focus on delivery of long-term our stakeholders with honesty, and sustainable value, continuous fairness, openness and by improvement and reliability. honouring our commitments.

Safety Responsibility We are dedicated to safety and We are committed to managing security, the elimination of our impact on, and contributing hazards and protecting people, positively to society and the property and our environment. environment.

People Service We are committed to investing We strive continually to anticipate in and empowering our people customer needs, exceeding their through training and education expectations. and to providing them with opportunities for rewarding careers.

Our vision, mission and values are what link all BBA Aviation companies and employees together as one team. They apply to everyone, and to all the businesses and functions across the BBA Aviation group. They describe our operating system, what each of us focuses on, cares about and the way we behave.

12 Strategic Report Our Strategy Our Strategy Our vision, mission and values are central to the way we operate and define our strategic approach.

Each of the divisions has clear strategies to compete effectively in its markets and to deliver superior through-cycle growth. These strategies are focused on:

— Active management of a balanced portfolio of market-leading flight support and aftermarket services businesses with good barriers to entry Performance

— Producing above average through-cycle growth in markets with attractive characteristics Growth

£ — Disciplined capital management with absolute cash generation and strong cash conversion to deliver attractive through-cycle returns Cash generation

— Value creative business investment and consolidation in fragmented markets

Value creative investment

Division strategies

Flight Support Aftermarket Services

— Operational/process improvement — Operational/process efficiency — Cross-business cooperation to drive — Cross-business cooperation to drive Performance customer base/offering and/or customer base/offering and/or operational improvement operational improvement — Investing in our people — Investing in our people

— Market growth/recovery — Market growth/recovery — Enhanced customer/service offer — Enhanced customer/service offer Growth — Continued share gain — Expand capabilities — Focus on innovation — Focus on innovation

£ — Increase efficiency/reduce — Increase efficiency/reduce duplication duplication Cash generation — Financial discipline — Financial discipline

— Consolidate our fragmented — Expand licences/authorisations/ markets platforms Value creative investment — Global network expansion in — Optimise geographic footprint relevant markets/locations

The success of the divisions to effectively execute these strategies is measured against the BBA Aviation and division goals and KPIs. Go to pages 17–19 Our Goals + Key Performance Indicators

BBA complete.indb 13 12/03/2014 12:10 Strategic Report Operating Model Operating Model BBA Aviation sets strategic direction and provides operational oversight to the Flight Support and Aftermarket Services divisions that go to market through their individual brands.

BBA Aviation is focused on driving long-term sustainable value creation through developing, accessing and allocating the scarce resources of human and financial capital to aviation support and aftermarket service companies. BBA Aviation sets the focus and strategic direction, exercises oversight through process-led active management and maximises the Group’s intrinsic cross-business opportunities.

The Group is structured into two divisions: Our Flight Support division (Signature Flight Support and ASIG) provides specialist on-airport Go to pages 28–37 support services to the owners and operators of private, business and commercial aircraft. Flight Support We aim to differentiate ourselves from our competitors through our customer relationships, For further details about how our Flight Support division the strength and relevance of our network, technical capability and market-leading performed in 2013 customer service.

Our Aftermarket Services division (Engine Repair & Overhaul and Legacy Support) is Go to pages 38–49 focused on the repair and overhaul of engines and the support of aerospace components, Aftermarket Services sub-systems and systems. We operate with high levels of intellectual property rights, derived For further details about how our Aftermarket Services from Original Equipment Manufacturer (OEM) authorisations and licences. In 2013 APPH, division performed in 2013 a landing gear and hydraulic sub-systems manufacturer, formed part of the Aftermarket Services division. This business was sold in February 2014.

Our operating model supports our overarching objective to deliver exceptional, long-term sustainable value for all our stakeholders.

Revenue by division

Aftermarket BBA Aviation Flight Support Services in 2013 62% 38%

Flight Support 62% Signature 70% ERO 71% Aftermarket Services 38% ASIG 30% Legacy 20% APPH 9%

BBA complete.indb 14 12/03/2014 12:10 Strategic Report Our Markets Our Markets BBA Aviation’s balanced portfolio of market-leading flight support and aftermarket services businesses support a broad spectrum of aviation market segments, including Business and General Aviation, Commercial and Military.

Business and General Aviation (68%) BBA Aviation’s operations in the Business and General Aviation (B&GA) market account for approximately two thirds of the Group’s revenue. B&GA covers thousands of aircraft large and small serving a wide variety of roles. Worldwide there are more than 18,000 jets, 13,000 turboprops and 19,000 turbine civil helicopters in operation classified as B&GA aircraft. Our Flight Support division primarily services business aircraft in this segment and our Aftermarket Services division supports a range of jets, turboprops and helicopters engaged in a variety of business, utility and public service roles.

B&GA flight hours and movements are the key growth drivers for both of our divisions, Go to pages 23–25 particularly in North America, which is the largest B&GA market and where over 75% of our Our Markets in 2013 revenues are generated. Increased activity means more customer arrivals and departures For further details about how our markets performed in 2013 throughout our Signature network, an increased uptake of fuel by those customers at Signature FBOs and a greater number of engine repair and overhaul events driven by increased engine usage. Measures that give a broader indication of the longer-term health of the market and future flying hours include new business aircraft (jet and turboprop) deliveries, the proportion of the fleet held for resale and the price of second-hand inventory.

B&GA is a market with attractive growth characteristics that are both cyclical and structural in nature. Following the North American market’s decline during the 2007-2009 downturn the market remains 20% off its peak activity levels. With no structural change in the market and B&GA travel remaining a key productivity and efficiency tool, particularly in North America where there are significant distances between large populations and a lack of efficient intermodal alternatives, inherent structural growth coupled with cyclical recovery remains an exciting prospect for the Group.

BBA complete.indb 15 12/03/2014 12:10 Strategic Report Commercial Aviation (25%) Our Markets BBA Aviation operates in the commercial aviation sector through our Flight Support division. ASIG, our commercial aviation service business provides fuelling, ground handling and technical services to commercial operators and airports around the world. Our Aftermarket Services division also participates in this market by providing engine repair and overhaul services to regional jet operators who fly the same small thrust engines used in B&GA. We also offer component and accessory repair services to the legacy commercial fleet and fuel measurement devices used on a number of newer aircraft models.

The primary growth driver for this market is the frequency of commercial aircraft movements which, in turn, drives demand for our on-airport services and aftermarket support. The long-term growth forecasts for commercial aircraft movements are 2.7% per annum in North America and 5% per annum globally for the next 20 years. Participants in the sector have recently resumed growth plans that are forecast to double the size of the commercial fleet by 2032. The strain such expansion will place on capital leads us to believe that airlines will remain favourable towards outsourcing many of their non-core service needs such as ground handling and into-plane fuelling.

Military Aviation (7%) Our services to the military market are primarily the support of legacy military platforms and those aircraft that are government adaptations of civilian aircraft. Much like our B&GA and commercial markets, demand is principally driven by flight activity.

Revenue by key markets

B&GA Commercial Military (68%) (25%) (7%)

Signature 64% ASIG 74% ERO 23% ERO 32% ERO 13% Legacy 47% Legacy 3% Legacy 10% APPH 30% APPH 1% APPH 3%

BBA complete.indb 16 12/03/2014 12:10 Strategic Report Our Goals Our Goals Each year BBA Aviation’s Executive Management Committee sets a series of short and medium-term goals related to our areas of focus which are then cascaded throughout the Group. Each business has actions aligned to the achievement of each of these specific and measurable goals that support the delivery of the strategy. The execution of those actions is actively monitored by Group management.

These specific, measurable, achievable, realistic and time-bound (SMART) goals are aligned with our mission statements: — Consistently exceeding customer expectations; — Valuing and empowering our people in a zero incident, safe environment; — Encouraging innovation; — Working together for greater gain; — Always behaving with integrity and respect.

For competitive reasons we do not disclose the detail of the short and medium-term goals related to these mission statements.

In 2013, we made good progress against our goals but we still have huge potential to push our performance in these areas further.

We continue to make improvements in the underlying operational progress of the Group. At the beginning of 2013 the Group was reorganised from five businesses into two divisions. The divisions and their management teams are now well established and the Group is beginning to access further cross-business opportunities through sharing best practice, standardised processes and practices, and optimising management and support structures.

BBA complete.indb 17 12/03/2014 12:10 Strategic Report Key Performance Indicators Key Performance Indicators Progress against our short and medium-term goals is monitored using financial and non-financial indicators. The financial indicators are linked to the four pillars: performance, growth, cash generation and value creative investment.

Performance Growth Financial KPIs Organic Revenue Growth: Monitoring organic revenue Adjusted Earnings per Share: Adjusted earnings per share growth provides a measure of the underlying growth of measures the profit attributable to shareholders after the the business. It excludes the impact of foreign currency impact of interest and tax. It excludes the impact of and fuel price fluctuations and any contribution from exceptional items and is divided by the weighted average acquisitions and disposals. number of shares in issue. 2013 Performance: Organic revenue growth demonstrated 2013 Performance: Adjusted earnings per share grew by 9% to the Group’s outperformance against our key markets that 30.5¢ (2012: 27.9¢) driven by the improvement in underlying remained broadly flat. operating profit and reduction in net interest expense.

13 2% 13 30.5¢

12 –1% 12 27.9¢†

11 5% 11 27.1¢†

10 4% 10 25.7¢†

09 –10% 09 22.4¢† † Restated for the impact of IAS 19 Revised

£ Cash Generation Value Creative Investment Cash Conversion: BBA Aviation’s cash conversion rate Return on Invested Capital (ROIC): Measuring ROIC ensures Go to pages 69–88 measures how effectively we convert operating profit into BBA Aviation is focused on the efficient use of assets, with Directors’ cash. Focusing on this measure encourages strong discipline the target of operating returns generated across the cycle Remuneration Report in the management of working capital and decisions on exceeding the cost of holding the assets. ROIC is defined Our longer-term KPIs: earnings per share growth and ROIC are capital expenditure. Good cash generation enables for the Group as underlying operating profit expressed as a directly linked to management incentivisation as set out in the ongoing investment in growth opportunities. percentage of average invested capital at constant currency, Directors’ Remuneration Report including goodwill and intangible assets amortised or written 2013 Performance: Strong cash conversion of 101% drove off to reserves. a 21% increase in free cash flow as a result of improved working capital and a reduction in cash exceptional items 2013 Performance: Return on invested capital increased by and net interest payments. 20 basis points to 10.0%, despite investments made in the year which are expected to generate superior returns over 13 101% the longer term. 12 92%† 13 10.0% 11 102% 12 9.8%† 10 124% 11 10.3%† 09 179% 10 † † Restated for the impact of IAS 19 Revised 9.3% 09 8.2%† 18 † Restated for the impact of IAS 19 Revised

BBA complete.indb 18 12/03/2014 12:10 Strategic Report Key Performance Indicators

Non-Financial KPIs Recordable Incident Rate (RIR): Each of our facilities uses Number of locations achieving zero RIR: BBA Aviation’s RIR as its primary health and safety performance metric. health and safety strategy seeks to deliver a zero incident RIR measures the number of full-time employees out environment in which every individual is responsible. Go to pages 50–55 of every 100 that sustain a recordable injury or illness. This approach is supported by our ZIPP (Zero Incident Corporate Social Philosophy & Process) global safety campaign. Responsibility 2013 Performance: The Group-wide RIR has continued For more information on our health and safety performance to fall over a six year period but plateaued in 2013 at 3.11. 2013 Performance: 144 out of 244 reporting locations achieved a RIR of zero during 2013, reflecting 59% of 13 3.11 our reporting locations. 12 –1% 3.04 13 144 11 3.08 12 –1% 160 10 3.25 11 134 09 4.18 10 124

09 115

In addition to these health and safety performance indicators we also have a series of other non-financial KPIs to monitor our progress against the short and medium-term goals that we do not disclose for competitive reasons.

BBA complete.indb 19 12/03/2014 12:10 Strategic Report Our Strengths Our Strengths As a focused business, BBA Aviation is ideally placed to exploit opportunities in the markets in which we operate. Five major factors will contribute to BBA Aviation’s continued success.

Market leadership — We are market leaders in the markets in which we operate with strong, recognised brands. — Signature Flight Support is the world’s leading fixed base operation (FBO) network with 85 wholly owned worldwide locations and 27 additional locations in which we operate as part of a joint venture or where we have a minority interest. Six further locations operate under licence. — ASIG is the largest independent refueller in the world. — Our Engine Repair & Overhaul businesses have market-leading positions in the majority of programmes in which they participate. — Legacy Support has a proven capability in the adoption of intellectual property to provide seamless support of OEM pedigree parts.

Barriers to entry — The requirement for a lease from an airport authority to operate an FBO. The average unexpired lease term of our FBO network in the USA is 18 years. — The need for an authorisation to provide commercial aviation services at individual airports and the required technical capability around into-plane refuelling. — The need for a licence from an OEM to service its engines. We are authorised by the OEMs for engine overhauls on 80% of the engines powering the B&GA fleet. — Intellectual property on aviation component sub-systems and systems which we license from OEMs.

Service orientation/attractive financial characteristics — Our businesses have a service focus and operate with low asset intensity and a naturally flexible cost base, making them highly cash generative and inherently well suited to deal with market cyclicality.

Growth — There are significant growth opportunities across all of our businesses resulting from cyclical recovery when it comes, structural growth and the scope for continued consolidation in what are generally fragmented markets.

Common focus — The business is actively managed by an empowered, experienced and motivated management team with a defined Group-wide focus as expressed in BBA Aviation’s vision, mission and values.

BBA complete.indb 20 12/03/2014 12:10 Strategic Report Our Risks Our Risks Like all businesses, BBA Aviation is affected by a number of risks and uncertainties, both internal and external.

Some of these may be beyond our control, and for some we are able to use our strengths to help mitigate any impact. We have a Group-wide risk management process in place to ensure we manage risk effectively in order to meet our objectives. The list below outlines the principal risks and uncertainties facing the Group.

Risk Potential Impact Mitigation

General economic — Reduction in revenues and profits — Strong financial controls to monitor downturn as a result of reduced B&GA and financial performance and provide a basis commercial flying and military for corrective action when required expenditure — Low fixed costs allow cost base to be flexed to meet demand — Mixture of early and later cycle businesses

Catastrophic global event — Reduction in revenues and profits — Strong financial controls to monitor (terrorism, weather) with a as a result of reduced B&GA and financial performance and provide a basis material impact on global commercial flying for corrective action when required air travel — Low fixed costs allow cost base to be flexed to meet demand

Legislative changes — Reduction in revenues and profits — Active participation in all relevant causing material increase as a result of reduction in B&GA flying industry bodies to cost of B&GA flight hours — Low fixed costs allow cost base relative to alternatives to be flexed to meet demand

Ability to attract and retain — Loss of key personnel — Remuneration structure designed high-quality and capable — Lack of internal successors to key to reward superior performance people management roles and promote retention — Short to medium-term disruption — Succession planning process embedded to the business with review at Executive Management Committee and Board level annually — Proactive employee development

Potential liabilities from — Reputational impact with associated — Standard operating procedures with defects in services and deterioration in customer routine root cause analysis of all incidents products relationships — Liability insurance — Loss of earnings from liability claims

Intentional or inadvertent — Reputational impact — Clear corporate policies and education non-compliance with — Exposure to potential litigation in major risk areas legislation or criminal proceedings — Semi-annual compliance certification by senior management — Robust internal control environment and regular review by internal and external audit

Environmental exposures — Loss of earnings from cost to — Strong procedural controls and physical remediate or potential litigation containment when working with fuel — Potential for loss of licence to operate or other hazardous chemicals — Greater than expected liabilities — Active management of known associated with historical operations environmental matters to minimise costs to resolve 21

BBA complete.indb 21 12/03/2014 12:10

Directors’Strategic OverviewReport Key2013 Performance Review Indicators 2013 Overview

Our Markets in 2013 23 Group Financial Summary 26 Flight Support 28 —Signature Flight Support 30 —ASIG 34 Aftermarket Services 38 —Engine Repair & Overhaul 40 —Legacy Support 44 —APPH 48 Corporate Social Responsibility 50 Financial Matters 56

BBA complete.indb 22 12/03/2014 12:10

Strategic Report Our Markets in 2013 Our Markets in 2013 BBA Aviation’s major market performed broadly as expected in 2013. North American business and general aviation (B&GA) movements increased by 2% year on year. However, B&GA movements in Europe declined by 2% and commercial movements in North America declined by 1% and in Europe declined by 2%. As anticipated, the overall impact of sequestration on our exposure to the military aviation market was limited.

Business and General Aviation B&GA flight activity during 2013 showed signs of modest growth in North America. Movements increased 2% for the year as a whole, with year on year growth recorded for 9 of the 12 months. B&GA aircraft movements in Europe, the second largest B&GA market, continued to be impacted by the ongoing economic uncertainty in the region and this was reflected in a 2% year on year decline.

B&GA Aircraft Movement Trends—USA and Europe

% change 20

-5

-10

Jan 10 | Jul 10 | Jan 11 | Jul 11| Jan 12 | Jul 12 | Jan 13 | Jul 13 | Dec 13 |

US flight activity monthly – year on year % change Europe flight activity monthly – year on year % change

Source: FAA (ETMSC) and EUROCONTROL (ESRA 08)

Delivery volumes of new business aircraft rose by 6.8% in 2013. Deliveries are forecast to continue to increase from 2014 due to existing order books, the introduction of new jet models entering service and the need to refresh the fleet as it ages. Long-term forecasts project the delivery of more than 9,000 new business jets between 2013 and 2022, with the North America market positioned to take the majority of new deliveries over the next five years.

BBA complete.indb 23 12/03/2014 12:10 Strategic Report Business Jet and Turboprop deliveries—historical and forecast Source: 2005-2013 historical Our Markets in 2013 deliveries: GAMA (excludes Number Airbus ACJ, Boeing BBJ, head of deliveries of state/shuttles and agricultural turboprops) 2,000 Source: 2014-2022 forecast deliveries: Teal Group , 1,800 December 2013, (excludes Airbus ACJ, Boeing BBJ and 1,600 head of state/shuttles, includes caravan turboprops) 1,400

1,200

1,000

800

600

400

200

0 05 06 07 08 09 10 11 12 13 14 15 16 17 1819 20 21 22

Turboprops Jets

Pre-owned inventories of business jets have remained broadly flat for the past three years although inventories of the newer aircraft – those up to five years old – are now at a five year low. By contrast, some of the older business jets (30+ years of age) are increasingly under pressure from regulatory mandates and market economics to be permanently removed from the market. Turboprop business aircraft have seen their inventory for sale return to more historically normal levels. During 2013, pricing for both segments remained broadly stable.

Despite the market having not recovered as quickly as we would have hoped from its decline during the 2007-2009 recession, the fleet has continued to grow throughout.

FAA Flight Hours and GDP FAA Business US GDP Jet Flight $bn Hours (000’s)

18,000 4,500

16,000 4,000

14,000 3,500

12,000 3,000

10,000 2,500

8,000 2,000

6,000 1,500

4,000 1,000

2,000 500

0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 0

GDP (Billions in 2009 Dollars) FAA Business Jet Flight Hours (Thousands)

Sources: FAA 2013 Forecast and U.S. Bureau of Economic Analysis

BBA complete.indb 24 12/03/2014 12:10

500 Over the longer-term, the key drivers for B&GA are: continued GDP growth; total wealth Strategic Report Our Markets in 2013 and the increasing value of people’s time; corporate investment and growing corporate confidence. The unusual nature of the 2007-2009 credit driven crisis and the slow associated recovery has meant that business reinvestment and confidence remains low despite corporate profits improving. However, we have begun to see modest improvements in these measures throughout 2013, supporting the first signs of a pick-up in B&GA movements in North America.

Commercial Aviation Worldwide commercial aircraft movements declined by 1% in 2013 versus 2012, reflecting the airlines’ continued capacity management. In North America and Europe, our highest penetration markets, commercial aircraft movements declined by 1% and 2% respectively as airline operators replaced older, smaller, less efficient jets with newer, larger, more efficient models.

Airline load factors reached historic highs during the year. As economies in the West recover, we anticipate that increased demand will help to increase the number of aircraft movements in our key markets.

OAG Aircraft Movements

2007—2013 (in 000’s)

13,000

12,000

11,000

10,000

9,000

8,000

7,000

6,000 07 08 09 10 11 12 13

Within North America To/From North America

Source: OAG facts December 2013

Military Aviation In 2013 we began to see the effects of sequestration in the US and, as anticipated, the overall impact on the Group has been limited. Whilst military budget cuts can negatively impact the flight activity of some military platforms and the associated maintenance spend, they can also have positive implications for the life extension of existing platforms as funding is directed away from new weapons development towards maintaining current platforms. Our aftermarket businesses are flexible and well positioned to support maintenance, overhaul and support for the older, out of warranty aircraft now in service.

BBA complete.indb 25 12/03/2014 12:10 Strategic Report Group Financial Summary Group Financial Summary

2012 Financial Summary 2013 (restated)* Inc/(dec) $m $m %

Revenue 2,218.6 2,178.9 2%

Underlying EBITDA 261.6 253.2 3%

Underlying operating profit 200.1 192.7 4%

Underlying operating profit margin 9.0% 8.8%

Total operating profit 169.4 160.0 6%

Underlying profit before tax 170.5 157.8 8%

Adjusted earnings per share 30.5¢ 27.9¢ 9%

Profit for the period 138.1 110.3 25%

Free cash flow 146.5 121.2 21%

Net debt 478.5 416.4

Net debt to EBITDA 1.8x 1.6x

Return on invested capital 10.0% 9.8%

* Restated for IAS 19: Employee Benefits (Revised) (IAS 19R) as set out in the Accounting Policies of the Group on page 101.

BBA Aviation made good progress in 2013 as expected, delivering further market Go to page 101 outperformance and an improvement in key operating metrics, as well as continuing Consolidated effectively to execute the Group’s growth strategy. Financial Statements For further information about the restatement for the new Group revenue in 2013 of $2,218.6 million increased by 2% compared with the prior year IAS 19 standard. (2012: $2,178.9 million), notwithstanding our key markets having remained broadly flat. There was a $27.1 million revenue contribution from acquisitions, but lower fuel prices reduced revenue by $20.6 million. The organic increase in revenue (excluding the impact of exchange rates, fuel prices, acquisitions and disposals) also totalled 2%.

Underlying operating profit (excluding exceptional items) increased by 4% to $200.1 million (2012: $192.7 million) and the Group operating margin showed a modest improvement to 9.0% (2012 fuel adjusted: 8.9%). The progress in underlying operating profit was largely due to the contribution from organic growth in Flight Support and margin progression in Aftermarket Services.

The previously announced reorganisation of the Group from five businesses to two divisions has begun to deliver benefits. Both management teams are now established and have started to implement more standardised processes and practices and to optimise management and support structures.

BBA complete.indb 26 12/03/2014 12:10 There was a $5.3 million reduction in the net underlying interest expense to $29.6 million Strategic Report Group Financial Summary (2012: $34.9 million) due to a reduction in the blended average interest rate, principally as a result of closing out higher rate interest rate swaps in mid-2012. Interest cover improved to 8.8 times (2012: 7.3 times) as a result of the reduction in net interest charge, coupled with the improvement in underlying EBITDA. Underlying profit before tax improved by 8% to $170.5 million (2012: $157.8 million).

The underlying effective tax rate of 14.5% was marginally lower than the prior year (2012: 15.4%). As a result of the improvement in underlying operating profit and reduction in net interest expense, basic adjusted earnings per share increased by 9% to 30.5 cents (2012: 27.9 cents).

Profit before tax increased by 16% to $145.2 million (2012: $125.1 million) and profit for the period increased by 25% to $138.1 million (2012: $110.3 million). Net exceptional items after tax amounted to $7.6 million (2012: $23.2 million), a reduction of 67%.

We once again turned operating profit into good operating cash flow with cash conversion of 101%. Free cash flow for the year increased by 21% to $146.5 million (2012: $121.2 million) with the increase principally as a result of improved operating profit, working capital and net interest payments. Net capital expenditure increased as planned to $76.3 million (2012: $55.4 million), equivalent to 1.2 times underlying depreciation and amortisation (2012: 0.9 times), with significant investments in key projects including the dedicated NetJets facility at Palm Beach, the new FBO terminal at Newark and the commencement of the redevelopment of our FBO at Luton. The Group’s strong cash conversion continued to support the on-going creation of significant investment capacity.

Total acquisition and licence spend in the year amounted to $86.1 million (2012: $35.5 million), including the $67.0 million acquisition of the Maguire Aviation FBO at Van Nuys, California, the $3.0 million purchase of the 75% share of Starlink Aviation’s FBO in Montreal, ASIG’s $4.3 million acquisition of gategroup’s cleaning and de-icing business in London and Dublin, and the $11.8 million investment in Legacy licences. The agreed $38.5 million acquisition of the Jet Systems FBO at Westchester County Airport, New York is expected to complete in the first half of 2014. As announced on 3 February 2014, we completed the disposal of APPH, further increasing BBA Aviation’s focus as an aviation support and aftermarket services provider. The total consideration of $128 million is equivalent to 17.8 times historic underlying operating profit. Further to the disposal of APPH, BBA Aviation intends to return the net cash proceeds to shareholders by way of a $125 million share repurchase programme. This is consistent with the Group’s disciplined approach to capital management, whilst retaining the financial headroom to continue to implement the Group’s acquisition strategy.

Net debt increased to $478.5 million (2012: $416.4 million) with a total net cash outflow of $61.6 million, after total dividend payments in the year of $71.3 million, the $28.8 million cash cost of closing out the final remaining cross-currency swaps in the first half of the year and aggregate acquisition and licence spend of $86.1 million. At the end of the year net debt to underlying EBITDA (excluding the pro-forma contribution from acquisitions) was 1.8 times (2012: 1.6 times).

Return on invested capital increased by 20 basis points to 10.0% (2012: 9.8%), despite investments made in the year which are expected to generate superior returns over the longer term.

BBA complete.indb 27 12/03/2014 12:10 Strategic Report Flight Support Flight Support

Our Flight Support businesses provide specialist on-airport support services including refuelling and ground handling to the owners and operators of private, business and commercial aircraft.

Signature Flight Support is the world’s largest and market leading fixed base operation (FBO) network for business aviation with more than 115 locations in the USA, Europe, South America, Africa and Asia. 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 a global provider of ground, fuel and airport facility services to airlines, airports, oil companies and industry partners in the commercial aviation sector. It safely delivers flexible and comprehensive service solutions including refuelling, ground handling, aircraft technical support services, facilities equipment maintenance and de-icing with considerable technical expertise at more than 80 airports in North America, Central America, Europe and Asia.

BBA complete.indb 28 12/03/2014 12:10 Financial Summary 2013 2012* Inc/(dec) Strategic Report $m $m % Flight Support

Revenue 1,375.9 1,321.8 4%

Organic revenue growth 4% (4)%

Underlying operating profit 116.3 110.9 5%

Underlying operating profit margin† 8.5% 8.5%

Operating cash flow 137.0 116.6 17%

Cash conversion ratio 118% 105%

Return on invested capital 9.7% 9.3%

† Operating margins at constant fuel prices * Restated for implementation of IAS 19 Revised

Flight Support revenues increased by 4% to $1,375.9 million (2012: $1,321.8 million). Acquisitions contributed $21.7 million of increased revenue and lower fuel prices reduced revenue by $20.6 million. On an organic basis, Flight Support revenues increased by 4%, which was largely driven by market outperformance as well as a return to more normal levels of de-icing activity following the weak comparator in 2012.

The organic revenue growth drove an increase in underlying operating profit for the division of 5% to $116.3 million (2012: $110.9 million) with operating margins unchanged at 8.5% (2012: 8.5%) after adjusting fuel prices.

Flight Support again delivered good cash conversion of 118% (2012: 105%) and positive absolute progress with a 17% increase in operating cash flow for the division to $137.0 million (2012: $116.6 million). Return on invested capital increased by 40 basis points to 9.7% (2012: 9.3%) despite the level of acquisitions and investments made to deliver future superior growth.

Performance Summary

Organic growth Cash conversion Return on invested capital

4% 118% 9.7%

BBA complete.indb 29 12/03/2014 12:10 Strategic Report Flight Support Signature Flight Support The world’s largest and market-leading FBO network

Revenue 2013 2012 Inc/(dec) $m $m %

USA 812.0 788.9 3%

Europe & ROW 156.4 164.0 (5)%

Total 968.4 952.9 2%

Performance Signature Flight Support (‘Signature’) delivered a strong performance in 2013 as it outpaced its major market in North America and grew its network through meaningful acquisitions and the continued expansion of Signature Select™, its asset light licensing model.

Signature’s headline revenue increased by 2% to $968.4 million (2012: $952.9 million). Adjusted for fuel price fluctuations, organic revenue increased by 4%. US B&GA activity increased by 2% in the year and European B&GA movements declined by 2%. In Europe, Signature was also impacted by slot availability at London Heathrow, although this issue has largely been resolved going into 2014. Continued outperformance in North America offset this European market softness.

During the course of the year Signature completed or signed agreements to add five new FBOs to its network. There are now a total of 118 FBOs in the network globally, with 71 of these in North America.

As previously announced, Signature extended its presence at Van Nuys Airport through the acquisition of Maguire Aviation Group, LLC making Signature the largest operator at this key B&GA airport. The acquisition completed in December 2013. Signature will also extend its leading position at Westchester County Airport through the acquisition of Jet Systems, which is expected to complete in the first half of 2014. Since year end Signature has also agreed to acquire FBOs at London Biggin Hill and Detroit Metropolitan Wayne County Airport, Michigan for a total cash consideration of $7.0 million.

Signature further extended its network in Europe, South America, the Caribbean and Asia as it commenced operations at Berlin Tegel Airport, won an RFP for a new FBO at Port of Spain, Trinidad, started handling operations at Singapore Changi International Airport and, in early 2014, started construction for a new FBO in Panama through an airport licensing agreement with ASIG.

In September Signature purchased a 75% share of Starlink Aviation Inc’s FBO in Montréal, Quebec, Canada, formerly part of the Signature Select™ network, representing the first acquisition of a Signature Select™ location. The Signature Select™ network continued to grow with the addition of the Sonoma Jet Center at Sonoma County Airport. Signature also signed an exclusive licensing arrangement with Imperial Oil to provide its 37 Esso dealers in Canada with the opportunity to join the Signature Select™ network.

BBA complete.indb 30 12/03/2014 12:10 31

BBA complete.indb 31 12/03/2014 12:10 Signature continued progress in securing lease extensions across its network with the average Signature residual lease life of Signature’s locations in the US at 18 years. In total, Signature has secured FBO experience 12 lease extensions in the last 2 years, including a 10-year lease extension to our sole source facility in Washington DC. Signature also won the RFP to construct a new facility at Mineta San Boca Raton, Florida Jose International Airport, under a 50-year lease which is expected to be completed in 2015. — 08.30 Signature has completed two of its previously announced construction projects with the Customers arrive and are met grand opening of the new dedicated NetJets private terminal at Palm Beach International by a warm, friendly Signature Airport in June and the state-of-the-art private aviation terminal at Newark Liberty greeting from a team who are focused on providing exceptional International Airport in November. Meanwhile, the ongoing redevelopment of Signature’s safety and service. FBO at Luton remains on track with the new hangar expected to be operational in the second quarter of 2014 and the new FBO opening in the second half of 2015. 16.09 In preparation for flight the Signature’s commitment to consistently exceeding customer expectations by continuously jet is refuelled by our highly improving the safety and quality of the services it provides resulted in another increase in its trained team. customer loyalty score to 85%, the highest level in the company’s history. 16.45 The jet is guided safely on to Key Facts the taxiway, ready for an efficient and on-time departure. 118 50 >150m A truly international FBO Unique network – 50 FBOs Over 150 million gallons of network – 118 locations in top US metro locations aviation fuel sold per annum worldwide 32

BBA complete.indb 32 12/03/2014 12:11 33

BBA complete.indb 33 12/03/2014 12:11 Strategic Report Flight Support ASIG The world’s leading independent refueller

Revenue 2013 2012 Inc/(dec) $m $m %

USA 293.9 276.2 6%

Europe & ROW 113.6 92.7 23%

Total 407.5 368.9 10%

Performance ASIG’s revenue increased by 10% to $407.5 million (2012: $368.9 million) despite the reduction in commercial aviation movements by 1% in North America and by 2% in Europe. Half of the revenue increase related to the acquisition of PLH Aviation Services and Dryden Air Services in Canada that completed in August 2012 and the half year impact of the acquisition of gategroup’s cleaning and de-icing business in London and Dublin that completed in June 2013. The balance of the increase was organic.

Under a new leadership team, ASIG has reinvigorated its focus on operational effectiveness, ensuring that it strives to maintain the highest safety standards, service differentiation and long-term is the lowest total cost quality service provider in its selected markets. Incremental short-term costs incurred to support this effort impacted ASIG’s financial performance in 2013, but have supported operational improvement in the second half and a number of encouraging new contract wins for 2014.

ASIG’s industry leading position as an into-plane re-fueller and manager of fuel farms was reinforced with the addition of a new fuel farm operation at Nashville International Airport and the successful renewal of three fuel farm management contracts. Furthermore, in February 2014 ASIG agreed to acquire the assets of Skytanking USA, Inc., an independent provider of aviation fuel handling services for a net cash payment of $16.8 million. Under the terms of the transaction, ASIG will divest its airport fuel operations at Linz Airport (LNZ) and Klagenfurt Airport (KLU) in Austria along with its 50% joint venture operations (with Skytanking) at Munich Airport (MUC) and Vienna International Airport (VIE) to Skytanking. The transaction is subject to customary approvals and is expected to complete in the first half of 2014. Upon completion the deal will create a further seven sole source commercial into-plane refuelling airports for ASIG in the US.

In August ASIG was awarded the contract for common check-in services for zones A and D of London Heathrow’s new Terminal 2 operation, which includes 14 airline customers. In addition, ASIG has also been awarded a number of ground handling contracts at Terminal 2. Terminal 2 will become operational in the summer of 2014. These contract awards build on ASIG’s prior acquisition of gategroup’s London cleaning and de-icing business and the acquisition of SGS at London Heathrow, supporting our strategy of achieving critical mass by line of business at hub airports.

Key Facts 84 40 >10bn Locations worldwide Locations at hub and large Over 10 billion gallons of aviation international airports fuel pumped per annum 34

BBA complete.indb 34 12/03/2014 12:11 BBA complete.indb 35 12/03/2014 12:11 ASIG Refuelling London Heathrow, UK — 08.38 The ASIG fuel truck is dispatched to the aircraft ready for refuelling.

08.58 The fuelling operator takes instructions from the pilot. The fuel truck, lifting platform and fuel hoses are positioned, checked and readied for refuelling.

09.45 21,136 gallons of fuel have been carefully uploaded at a rate of 900 gallons per minute. The aircraft is safely refuelled and ready for departure.

6758_BBA_AR PART 2 front p22-68.indd 36 14/03/2014 18:16 BBA complete.indb 37 12/03/2014 12:11 Strategic Report Aftermarket Services Aftermarket Services

Our Aftermarket Services division is focused on the repair and overhaul of engines and the manufacture and service of aerospace components, sub-systems and systems.

Our Engine Repair & Overhaul (ERO) businesses are leading independent engine repair service providers to the B&GA market. Together, our ERO businesses have strong and established relationships with all major engine OEMs and are authorised to work on 80% of 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 landing gear and hydraulic sub-systems manufacturer, designing, engineering, manufacturing and supporting systems and sub-systems for original equipment and aftermarket applications.

BBA complete.indb 38 12/03/2014 12:11 Financial Summary 2013 2012* Inc/(dec) Strategic Report $m $m % Aftermarket Services

Revenue 842.7 857.1 (2)%

Organic growth (2)% 3%

Underlying operating profit 101.3 99.5 2%

Underlying operating profit margin 12.0% 11.6%

Operating cash flow 98.4 93.1 6%

Cash conversion ratio 97% 94%

Return on invested capital 11.3% 11.1%

* Restated for implementation of IAS 19 Revised

Revenue in Aftermarket Services declined by 2% to $842.7 million (2012: $857.1 million) with the organic reduction also 2% and there was a $5.4 million revenue contribution from acquisitions. Despite the organic revenue reduction, there was a 2% increase in underlying operating profit to $101.3 million (2012: $99.5 million), with operating margins improving by 40 basis points to 12.0% (2012: 11.6%).

The division delivered a 6% increase in operating cash flow to $98.4 million (2012: $93.1 million) with cash conversion of 97% (2012: 94%). Return on invested capital improved by 20 basis points to 11.3% (2012: 11.1%).

Performance Summary

Organic growth Cash conversion Return on invested capital

(2)% 97% 11.3%

BBA complete.indb 39 12/03/2014 12:11 Strategic Report Aftermarket Services Engine Repair & Overhaul Leading independent OEM authorised engine repair companies

Revenue 2013 2012 Inc/(dec) $m $m %

USA 492.4 541.2 (9)%

Europe & ROW 105.4 100.0 5%

Total 597.8 641.2 (7)%

In Engine Repair and Overhaul (ERO), revenue was $597.8 million (2012: $641.2 million), an 8% organic revenue reduction. This was against a particularly strong 2012 comparator and amidst a weaker overall market for its authorised programmes, particularly Tay and TFE731. In the first half of the year ERO implemented a sales organisation restructuring, which resulted in some short-term disruption and loss of market share. Whilst we are seeing the broader benefits of the sales force restructuring and there was some recovery in the third quarter, demand for Tay overhauls in particular was weaker than anticipated in the fourth quarter and is expected to remain subdued in 2014.

ERO continues to focus on improving operational efficiency and expanding its global field support organisation through its F1RST SUPPORT™ network. Additionally, ERO launched a mobile app for customers to track work in progress.

ERO added the Honeywell RE220 auxiliary power unit (APU) line authorisation, bolstering its field service portfolio for Gulfstream and Bombardier long-range aircraft. In early 2014, ERO signed an authorisation with Woodward to handle the maintenance, repair and overhaul for PT6 and TPE331 Fuel Controls & Governors, and signed agreements to be authorised maintenance repair and overhaul centres for the RR300, which powers the rapidly growing fleet of Robinson R66 helicopters.

ERO’s investments in 2012 began to deliver benefits with an increased inflow of field repair work on the Bombardier Challenger 300 and Gulfstream G280 business jets as a result of the Consolidated Turbine Services acquisition and the first series of on-field engine removals for the BR710 turbofan engine following the authorisation from Rolls-Royce CorporateCare™ for mobile repair support and a steady flow of engine inputs following the agreement signed with GE Aviation to handle all engine care and maintenance programme commercial shop visits for the CT7-5A and -9B engines used on Saab 340 aircraft.

In late May, ERO’s Singapore Regional Turbine Centre (RTC) completed its first Honeywell TFE731 Major Periodic Inspection (MPI), the first of several engines to be serviced at the facility. The Singapore RTC is the only Honeywell authorised facility in the region and also houses a F1RST SUPPORT™ centre.

BBA complete.indb 40 12/03/2014 12:11 41

BBA complete.indb 41 12/03/2014 12:11 In line with our continued assessment of ERO’s operational effectiveness, we undertook ERO a detailed review of ERO’s capacity which has confirmed the opportunity for significant Major repair structural cost improvement. Over the course of the next two years we will therefore be undertaking a phased rationalisation of our ERO footprint, transitioning products to existing and overhaul facilities and to a new facility to be constructed in the Dallas Fort Worth area. The total Dallas, Texas cash cost of the project is expected to amount to $16 million, with annualised savings — of $10 million, which are expected to begin to accrue from mid-2014. Total exceptional Day 01 charges of $11 million are expected to be incurred over the life of the project which is likely A Honeywell TFE731 engine is to be more than offset by exceptional gains on the disposal of APPH. received by our OEM authorised heavy maintenance facility in Dallas, Texas where it is logged Key Facts and unloaded, prior to inspection.

80% >7,000 >100 Day 05 Authorisations supporting Strong customer relationships More than 100 field service The engine is disassembled, 80% of the engines – global network of more personnel globally cleaned and inspected. All parts powering the B&GA fleet than 7,000 customers are audited and faulty parts are identified as part of the repair and overhaul process.

Day 21 Following a comprehensive repair and overhaul process the engine is reassembled, inspected and tested before it is returned to service. 42

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BBA complete.indb 43 12/03/2014 12:11 Strategic Report Aftermarket Services Legacy Support Leading supplier of OEM licensed legacy products

Revenue 2013 2012 Inc/(dec) $m $m %

USA 105.3 93.9 12%

Europe & ROW 62.9 53.4 18%

Total 168.2 147.3 14%

Performance Legacy Support’s revenue increased by 14% to $168.2 million (2012: $147.3 million), the majority of which was organic. Sales were driven by the substantial completion of large contracts for landing gear shock strut assemblies for the AH-64 Apache, and LANTIRN environmental control units for the F-15, together with strong demand for Airbus 320 and B777 fuel gauging system upgrades, and significant sales for landing gear cylinder assemblies for the EA-6B Prowler to the US government. Organic revenue growth was 15%, although substantial completion of these larger contracts resulted in a decrease in backlog of 14% year over year.

In the first half of 2013, Legacy Support successfully transferred the product lines and staff from its facility in Slough, UK to its Cheltenham, UK facility. A regional base was also established in Singapore, co-located with ERO’s regional turbine centre, to provide component and accessory spares and MRO services in-region. Additionally, Legacy successfully transitioned two new product lines from licence agreements signed in December 2012 into its Cheltenham and Chatsworth facilities, further proving Legacy’s successful adoption and transition process.

Legacy Support extended its OEM relationships and grew its portfolio of products under licence in 2013, signing three new licence agreements with Curtiss-Wright Controls and two new licences with Safran Power Systems. These new licences for electronic and electro-mechanical products used on a range of military and commercial platforms represented a total $35.2 million investment with $11.8 million paid in the year.

Since year end, Legacy Support has signed a licence agreement with Rolls-Royce, another new OEM relationship, for the complete support of spare components for the Dart engine, which powers the HS-748 and YS-11 aircraft.

The new licences signed during 2013 are expected to begin to contribute to revenues from the second half of 2014.

Key Facts >4,000 18 >3,000 Licensed for over 4,000 parts Relationships with 18 OEM Diverse, global customer licensors base with more than 3,000 customers worldwide

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BBA complete.indb 45 12/03/2014 12:11 Legacy Support Fuel probe testing Cheltenham, UK — Day 01 Probes that are critical to the aircraft’s fuel measurement system are assembled and then submerged in aviation fuel for testing.

Day 01 Skilled Legacy Support technicians undertake detailed testing of the fuel probes.

Day 02 Following successful testing, the fuel probes are left to dry for 24 hours before being signed off, ready for distribution.

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BBA complete.indb 47 12/03/2014 12:11 Strategic Report Aftermarket Services APPH Niche landing gear and associated hydraulic equipment provider

Revenue 2013 2012 Inc/(dec) $m $m %

USA 13.7 12.7 9%

Europe & ROW 63.0 55.9 13%

Total 76.7 68.6 12%

Performance In APPH, revenue increased by 12% to $76.7 million (2012: $68.6 million), with 13% organic growth which was principally driven by increased original equipment sales for the Hawk, C27 and AW159 programmes. Sales of spare parts remained broadly flat. This strong performance built on the significant operational and financial progress the business had made over the last two years.

In February 2014 we announced the sale of APPH to Héroux-Devtek Inc. for a total cash consideration of $128 million, representing 17.8 times $7.2 million of underlying operating profit for 2013. APPH was the only part of BBA Aviation that focused on product design and development, with significant manufacturing activities and a higher fixed cost base than the rest of the Group. The disposal enhances the Group’s focus on aviation support and aftermarket services, as well as delivering good value for our shareholders.

Key Facts 40+ >68% 61% Supporting products with Over 68% of revenues from 61% aftermarket support lifespans of 40+ years programmes where APPH owns or controls the intellectual property rights

A main landing gear shock absorber for the C27J military transport aircraft ready for inspection. 48

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Strategic Report Corporate Social Responsibility Corporate Social Responsibility

Corporate Social Responsibility 50 Approach to CSR 52 External reporting, recognition and rewards 52 Health and Safety 53 Community 53 Environment 54 Employees 55

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Strategic Report Corporate Social Responsibility Corporate Social Responsibility Every day our people put our values into action with pride, performing services for customers safely, responsibly and with integrity.

Corporate Social Responsibility (CSR) is embedded in our vision, mission and values and is fundamental to our objective of creating sustainable long-term value for all our stakeholders.

Our CSR goals are actively promoted and supported by management systems at all levels. Through this we are able to make a bigger difference in the areas we choose to focus on.

Stretching health and safety and environmental targets are applied at each of our businesses down to site level and we have formal frameworks and policies in place that guide behaviour and assist us in areas such as Business Ethics, Community Involvement and Charitable Giving.

CSR is important to our stakeholders and our aim is to achieve continuous improvement in all aspects of CSR every year. We involve our employees personally in these efforts and invest in Go online at www.bbaaviation. new technologies, equipment and training and development programmes where we believe com/about-us/ we can make a difference. Our businesses have much in common and plenty to learn from corporate-social- each other and we encourage working together, sharing ideas and good practices. responsibility.com For further information about our approach to CSR BBA Aviation does not have a specific human rights policy. The requirement for a specific and our CSR Report policy will continue to be monitored. Our vision, mission and values govern the way we do business and are consistent with our human rights obligations. A number of our policies including the Disclosure of Unethical Conduct Policy, Bribery and Corruption Policy and the Ethics Implementation Policy, whilst not specifically mentioning human rights, recognise the importance of how we conduct our business and the impact on a wide range of stakeholders.

On the BBA Aviation website you can read more about BBA Aviation’s approach to CSR including downloadable copies of our current and past years’ CSR Reports together with copies of our relevant policies and case studies showing some of the varied projects that BBA Aviation’s businesses have been undertaking.

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BBA Aviation’s Approach to CSR External reporting, recognition and rewards The following is an extract from BBA Aviation’s “Approach BBA Aviation’s commitment to the environment and to CSR” policy document which is reviewed each year to health and safety continues to be recognised by our by the Board. The full document, which deals with customers, our business partners and by accreditation additional areas such as Business Ethics, Transparency organisations. and Human Rights can be found in the CSR section of the BBA Aviation website. Awards Shell Goal Zero Award Scheme, Shell Goal Zero Award Scheme, Health and Safety Health, Safety, Security and Health, Safety, Security and — We are committed to achieving a working Environmental Diamond Environmental Gold: environment which is safe, secure and which Award: ASIG GASHCo, Birmingham London Gatwick supports healthy lifestyles — We will aim to pursue, achieve and promote Shell Goal Zero Award Scheme, Shell Goal Zero Award Scheme, best practices on Health and Safety specific to Health, Safety, Security and Health, Safety, Security and Environmental Double Environmental Gold: Klagenfurt the aviation industry Platinum: ASIG London Luton

Employees Shell Goal Zero Award Scheme, Shell Goal Zero Award Scheme, — We value the diversity of our employees and Health, Safety, Security and Health, Safety, Security and promote an inclusive environment recognising Environmental Double Environmental Gold: Platinum: ASIG London Gatwick London City the importance of equality of opportunity — We support employees through training and Shell Goal Zero Award Scheme, Shell Goal Zero Award Scheme, development, encouraging them to expand Health, Safety, Security and Health, Safety, Security and Environmental Platinum: Linz Environmental Gold: their capabilities and realise their potential London Stansted

Environment Shell Goal Zero Award Scheme, British Safety Council – — We will manage, and strive to reduce, our Health, Safety, Security and International Safety Award Environmental Gold: APPH Nottingham environmental impact through the more efficient Bournemouth use of the resources our businesses consume — We will support innovative developments in Dallas Water Utilities, Blue Thumb Award (Wastewater technologies that support our business objectives discharge) 2013 from the and can offer environmental, community and City of Dallas: Dallas Airmotive’s social benefits Forest Park facility

Community — We will identify opportunities to benefit local communities where we operate through community involvement and charitable giving

CSR KPIs Details on BBA Aviation’s CSR KPIs can be found on the next page of this report for both health and safety and environmental measures.

Since 2006, as BBA Aviation plc, we have been a member of the FTSE4Good index and participated in the Carbon Disclosure Project.

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Health and Safety BBA Aviation’s health and safety strategy seeks to deliver a zero incident environment in which all employees take responsibility for their own and others’ safety. The Group-wide Recordable Incident Rate (RIR) has fallen over a six year period but plateaued in 2013 and was 3.11. To address this, the Group has established a cross functional Safety Steering Committee to provide a coordinated leadership for health and safety matters across BBA Aviation and drive towards our goal of zero incidents with particular focus on Tow it like you own it behavioural safety. In 2012 Signature Flight Support introduced a new employee recognition programme to 144 out of 244 BBA Aviation reporting locations achieved a RIR of zero during the year. enhance its already successful Go to page 19 56 sites have achieved over five years since their last recordable incident. safe tow compliance policy. Key Performance The programme gives formal Indicators Signature Flight Support 67 sites have had no recordable incidents* and 20 sites have achieved recognition to those who carry For further information about over five years since their last recordable incident or have not had one out safe tows of aircraft using our non-financial KPIs in the past five years. coloured aircraft shaped pins: silver for 100 safe tows, gold ASIG 55 sites have had no recordable incidents* and 28 sites have achieved for 500 and platinum for 1,000. over five years since their last recordable incident or have not had one In 2013, Signature awarded in the past five years. 279 silver, 172 gold and 82 platinum pins. DAI 14 sites have had no recordable incidents* and 8 sites have achieved over five years since their last recordable incident or have not had one in the past five years.

Ontic 1 site has achieved over a year with no recordable incidents. * since start of 2007 or since opening (where later).

Community BBA Aviation’s Group-wide Community Involvement and Charitable Giving Framework sets out the approach our sites should take to projects, volunteering and fundraising in their local communities.

Each of our sites and businesses recognises the importance of being a good neighbour and contributing to the community in which it operates. Having this framework has led Making a bigger difference to a more structured way of working and has encouraged our businesses and employees Seventy-four employees from Dallas Airmotive’s Heritage Park to focus on fewer, more ambitious activities, enabling our teams to make a bigger facility volunteered for the contribution to the causes that they care about and fostering longer-term relationships GRACE (Grapevine Relief and with those organisations. Community Exchange) Feed Our Kids programme at which 1,515 lunches were served to Charitable giving programme local children over the course BBA Aviation’s parent company charitable giving programme is designed to complement of a week. Volunteers cooked and served meals every day and and enhance the many fundraising and community activities undertaken by BBA Aviation coordinated travel to and from employees around the world. Since 2010, the programme has donated more than $750,000 the venue. Members of the to organisations with strong local connections to BBA Aviation sites and a connection team also used the event as an opportunity to talk to the to aviation, engineering or education. children about safety – using materials and prizes from the SafeStartTM programme.

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Environment BBA’s environmental reporting system requires each site to record its use of resources, enabling each to track progress and to focus on measures that will drive continuous improvement in performance.

The table below shows the trends over the past five years in the Group’s environmental KPIs which are normalised for comparison purposes to dollars of revenue. We use the Reducing emissions from services of an external consultant to review BBA Aviation’s process for collecting and ground service equipment consolidating this data. (“GSE”) In late 2012, BBA Aviation began a programme of GSE vehicle The requirements of the Companies Act 2006 (Strategic Report and Directors’ Report) renewal across its ASIC and Regulations 2013 require quoted companies to report globally on greenhouse gas emissions Signature bases in California (GHG reporting). to comply with new State standards on vehicle greenhouse gas emissions. Greenhouse Gas Emissions / Environmental Reporting Data Lower emission and more efficient models were identified Combustion of fuel and operation of facilities 55,658 tCO e 2 as replacements. The first phase

Electricity, heat, steam and cooling purchased for own use 54,257 tCO2e of replacements was completed

Total 109,915 tCO2e by the end of H1 2013 and an ongoing retirement and replacement plan has been GHG Intensity Measurement formulated to meet California’s Emissions reported per $m of revenue (2013) 49.543 tCO e 2 compliance requirements over the next ten years. Learnings Methodology from the programme are We have reported on all of the emission sources required under the Companies Act 2006 informing new GSE equipment purchases across the US and will (Strategic Report and Directors’ Report) Regulations 2013 with the exception of fugitive be rolled out worldwide in the emissions, which are not thought to be material. All of these sources fall within our next two to three years. consolidated financial statements.

We have used the World Business Council for Sustainable Development / World Resources Institute Greenhouse Gas Reporting Protocol Corporate Accounting and Reporting Standard (revised edition), and emission factors from UK Government’s GHG Conversion Factors for Company Reporting 2013.

BBA Aviation has voluntarily reported environmental metrics for a number of years. The table below shows the disclosures, in a format that is consistent with previous disclosures, all of which show improvement.

Units 2013 2012 2011 2010 2009

Electricity Consumption KiloWattHr/ 48,155 51,829 55,188 66,621 71,926 $m revenue

GHG Emission Tonnes/ 49.54 57.25 61.45 75.31 81.42 $m revenue

Water Consumption Thousand litres/ 161 182 196 213 244 $m revenue

Revenue $m 2,218.6 2,178.9 2,136.7 1,833.7 1,686.1

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Employees Our businesses provide each of our employees with specific and relevant job-related training and personal support while, at Group level, we develop programmes – for example leadership and general skills training – that can be implemented across all sites.

Diversity information At BBA Aviation we believe diversity enhances the performance and culture of our Developing our talented business and we apply this philosophy when seeking to find the best people to fill roles employees is important for in our organisation. the future leadership of BBA Aviation. BBA Aviation has made significant investment in this Recognising that gender is only one particular form of diversity to which we are committed, area in 2013 and has launched we are pleased that across BBA Aviation’s various executive management teams women a suite of leadership make up between 15% and almost 30% of the population and we look forward to seeing development initiatives. The leadership development this continue. initiatives include a bespoke leadership programme, The table below shows the percentage of women employed in senior roles as at developed in conjunction with Duke Corporate Education, 31 December 2013: for approximately 100 senior Population Population size % age of women leaders. Additionally, Flight Board 8 12.5% Support and Aftermarket Executive Management Committee 7 28.6% Services have rolled out specific supervisor management Senior Management Group 117 15.4% training tailored for the needs of Directors of subsidiaries included in consolidation (note 1) 70 15.7% their respective organisations.

Note 1 This disclosure includes dormant companies and multiple directorships.

BBA complete.indb 55 12/03/2014 12:11 Strategic Report Omaha, Nebraska), Sun Aircraft Services Inc. (a line maintenance Financial Matters Financial Matters business in Washington D.C.) and Consolidated Turbine Support Inc. (a mobile engine support business based in Phoenix, Arizona) for an aggregate consideration of $35.1 million. Mark Hoad In February 2014 we announced the sale of APPH to Group Finance Director Héroux-Devtek Inc. for a total cash consideration of $128 million, representing 17.8 times $7.2 million of underlying operating profit for 2013. APPH was the only part of BBA Aviation that focused on product design and development, with significant manufacturing activities and a higher fixed cost base than the rest of the Group. The disposal enhances the Group’s focus on aviation support and aftermarket services, as well as delivering Exchange Rate good value for our shareholders. BBA Aviation’s revenues, cash flows and balance sheet are principally denominated, and as a result reported, in US dollars. Interest The exchange rates used to translate the key non-US dollar The underlying net interest charge amounted to $29.6 million flows and balances were: (2012: $34.9 million) with the decrease due to a reduction in the 2013 2012 2011 blended average interest rate, principally as a result of closing Sterling – average 1.57 1.59 1.60 out higher rate interest rate swaps in mid-2012. Interest cover Sterling – spot 1.66 1.62 1.55 improved to 8.8 times (2012: 7.3 times) as a result of the reduction in net interest charge, coupled with the improvement in Euro – average 1.33 1.29 1.39 underlying EBITDA. Underlying profit before tax improved Euro – spot 1.38 1.33 1.29 by 8% to $170.5 million (2012: $157.8 million).

Central Costs Tax and Dividends Unallocated central costs were broadly unchanged at The underlying effective tax rate of 14.5% was marginally better $17.5 million (2012: $17.7 million). than expected due to favourable developments in settling open tax years and was broadly unchanged year over year (2012: 15.4%). Exceptional Items During the year we agreed a settlement with HMRC in Exceptional items after tax amounted to $7.6 million (2012: $23.2 relation to the 2006 to 2012 tax years, as a result of which we million), a reduction of 67%. Included within exceptional items have agreed to make total payments of $42 million of which were $6.1 million of restructuring expenses (2012: $17.0 million), $8 million was paid in 2013, with the balance to be paid in 2014. relating principally to the costs of the transition to the two The settlement was fully provided for. division structure; $8.7 million of M&A related costs (2012: $6.6 At the time of the interim results, the Board declared an million) principally incurred in pursuit of value creative increased interim dividend of 4.4¢ per share (2012: 4.2¢ per share). investment and acquisition opportunities; $6.9 million of The Board is now proposing a final dividend of 11.00 cents per environmental costs in relation to disposed business (2012: share (2012: 10.45¢ per share), taking the dividend for the full year $1.5 million); and non-cash amortisation of acquired intangibles to 15.40 cents per share (2012: 14.65¢ per share), an increase of 5%. $9.0 million (2012: $7.6 million). There was a $5.4 million accounting gain in relation to a restructuring of our investment Pensions in Lider in Brazil (2012: nil). There was a $6.5 million tax credit on The combined accounting deficit for the UK and US pension these exceptional items (2012: $9.5 million), together with a schemes decreased to $57.6 million (2012: $66.3 million), $11.2 million tax credit relating to a reduction in our tax risk principally as a result of cash contributions and positive asset provision as a result of the progress made in relation to open returns. The 2012 triennial valuation of the UK defined benefit tax years (2012: nil). pension scheme was completed during the year, resulting in a funding deficit of £30.4 million ($48.6 million) as calculated at Acquisitions and Disposals 31 March 2012. The Company will continue to pay scheme During 2013 the Group acquired two businesses in our Flight expenses on an as incurred basis. The next triennial valuation is Support division for a total initial consideration of $71.3 million. due to be undertaken in 2015. In June and July ASIG completed the acquisition of gategroup’s As a result of the disposal of APPH post the year-end, cabin cleaning, de-icing, and aircraft exterior washing business a participating employer in the UK defined benefit scheme, at London Heathrow and de-icing and aircraft exterior washing ordinarily a section 75 debt would have been triggered. We have business at Heathrow, London Gatwick and Dublin for an agreed with the Trustees of the scheme to apportion the section aggregate cash consideration of $4.3 million. In December 75 debt and at the same time have agreed to put in place an Signature completed the acquisition of Maguire Aviation Group, asset backed funding structure which replaces the previously LLC making Signature the largest operator at Van Nuys Airport agreed schedule of deficit contributions. As a result of this the for cash consideration of $67.0 million. Further details of these Group expects to make payments of £3.7 million (c. $6 million) in acquisitions are given in note 24 of the financial statements. 2014 and £6.9 million (c. $11 million) in 2015. Thereafter the In addition, we invested $3 million in a 75% share of the Starlink payments will reduce to approximately £2.7 million (c. $4 million) Aviation FBO in Montreal, Canada. per annum for a further 18 years, unless the scheme becomes In 2012 the Group acquired PLH Aviation Services and 110% funded in which case the payments will be suspended. Dryden Air Services (airport service providers principally The accounting deficit at 31 December 2013 does not reflect 56 operating in Canada), Elliot Aviation of Omaha Inc. (an FBO in the impact of this new structure.

BBA complete.indb 56 12/03/2014 12:11 A revised pensions accounting standard, IAS 19, was effective Financial Risk Management and Treasury Policies Strategic Report Financial Matters from 1 January 2013. Prior year comparative figures have been The main financial risks of the Group relate to funding and restated to reflect this change. The impact of this revised liquidity, interest rate fluctuations and currency exposures. standard is to move scheme administration costs from net A central treasury department that reports directly to the Group interest expense to operating expenses, and to calculate interest Finance Director and operates according to objectives, policies income on scheme assets based on the scheme discount rate and authorities approved by the Board, manages these risks. rather than on expected returns on scheme assets. The impact The overall policy objective is to use financial instruments of the restatement on 2012 is a reduction in underlying profit to manage financial risks arising from the underlying business before tax of $5.2 million and a 1.1 cents per share reduction activities and therefore the Group does not undertake to adjusted basic EPS. speculative transactions for which there is no underlying financial exposure. More details are set out in note 17 to Cash Flow and Debt the Consolidated Financial Statements. Free cash flow of $146.5 million increased by 21% compared with the prior year (2012: $121.2 million), with the increase principally Funding and Liquidity as a result of improved operating profit, working capital and net The Group’s operations are financed by a combination of interest payments. retained profits, equity and borrowings. Borrowings are generally Gross capital expenditure increased to $78.0 million (2012: raised at Group level from banks and then lent to operating $56.1 million), with the Group continuing to invest in support of subsidiaries. The Group maintains sufficient available committed future growth and in relation to lease extensions at Signature. borrowing facilities to meet any forecasted funding This represents a capital expenditure to depreciation ratio of requirements. 1.3 times (2012: 0.9 times). As well as the acquisitions outlined At the end of 2013, the Group had a committed bank above, the Group invested $11.8 million in new licences for the facility of $750 million of which $318 million was drawn. In Legacy Support business (2012: $0.4 million). addition, the Group had $300 million of US private placement The cash dividend payment in the year amounted to loan notes which were fully drawn. These facilities are subject $71.3 million (2012: $67.9 million) reflecting the increased to cross-default. In addition, the Group maintains uncommitted dividend per share declared. During the year the Group closed facilities for daily working capital fluctuation purposes. At the end out its final cross currency swap at a cash cost of $28.8 million. of 2013, the undrawn amount of these uncommitted facilities Net debt increased by $62.1 million to $478.5 million totalled $21.6 million. (2012: $416.4 million) and net debt to EBITDA was 1.8 times The rationale for preparing the financial statements on (2012: 1.6 times). a going concern basis is set out on page 89. A significant proportion of our debt is held in US dollars as a hedge against our US dollar assets. A profile by currency Interest Rate Risk Management is shown in the table below: The interest rate exposure arising from the Group’s borrowing and deposit activity is managed by using a combination of fixed (Debt)/Cash Profile by Currency and variable rate debt instruments and interest rate swaps. The 2013 2012 Group’s policy with respect to interest rate risk management is $m $m to fix portions of debt for varying periods based upon our debt US dollars (505) (439) maturity profile and an assessment of interest rate trends. At the Sterling 9 11 end of 2013, approximately 42% of the Group’s total borrowings Euros 11 7 were fixed at weighted average interest rates of 3.43% for a Others 6 5 weighted average period of two years.

Total (479) (416) Currency Risk Management The Group’s policy is to hedge all significant transactional Having refinanced its debt facilities in the first half of 2011 the currency exposures through the use of forward currency Group enjoys long-dated committed facilities with a $750 million contracts. The Group’s policy is to draw its borrowings bank facility, with $250 million maturing in 2014 and $500 million principally in US dollars in order to match the currency of its in 2016, as well as $300 million of US private placement notes cash flows, earnings and assets, which are principally which mature between 2018 and 2023. denominated in US dollars. The Group policy with respect to cash deposits is only to have deposits with pre-approved banks with limits on the The Strategic Report was approved by the Board on amounts deposited with each institution dependent on their 4 March 2014 and signed on its behalf by: long-term credit rating. Deposits are generally for short-term maturity (less than three months). Simon Pryce Mark Hoad Group Chief Executive Group Finance Director

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Directors’ Report Directors’ Report

Directors’ Corporate Governance Statement 59 Directors’ Remuneration Report 69 Going Concern 89 Additional Disclosures 90 Statement of Directors’ Responsibilities 92

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Directors’ Report Directors’ Corporate Directors’ Corporate Governance Statement Governance Statement

Michael Harper In 2013, our Board performance evaluation was once again Chairman internally facilitated via internal questionnaires and individual reviews and we expect the next evaluation to be undertaken in the second half of 2014. The Company’s remuneration policy seeks to align the interests of executive directors and shareholders and is structured to enable the Group to attract, motivate and retain I am pleased to introduce the Directors’ Corporate Governance the talent required to deliver the business strategy. The Board Statement for 2013. is aware of the sensitivity relating to executive director The Board is responsible for ensuring the continuing remuneration and understands the requirements of the new long-term success of BBA Aviation and the delivery of regulations that have come into effect. We have included long-term, sustainable value creation for all of BBA Aviation’s total remuneration figures for executive directors this year stakeholders. Governance is a very important contributor to and shareholders will be asked to vote on the Company’s the success of the Group and it is important we take pride not remuneration policy at the forthcoming AGM. only in what we do but also in the way we conduct our We keep all our policies and procedures under regular business and deliver our strategic objectives. The Board is review, bearing in mind the ever evolving business and therefore committed to ensuring that appropriate standards governance environment that we operate in, as well as drawing of governance are maintained throughout the Group. on the range of experience offered by Board members. This report sets out the way we comply with good The Corporate Governance Statement that follows gives corporate governance principles. It describes how the Board more details about our governance policies and procedures, and its committees work, and also our approach to risk about the structure of our Board Committees and about the management and internal control. areas our meetings focus on. As part of our planned and continuing evolution of Board members appreciate their interactions with the Board, there have been a number of changes in 2013. shareholders and listen carefully to any comments. I welcome As announced in last year’s report, Mark Harper retired from your comments on this Corporate Governance Statement the Board following the Company’s AGM in May 2013. In and on the 2013 Annual Report more generally. addition, Hansel Tookes retired from the Board on 30 As we announced in October 2013, I will retire from the September 2013 after serving as a non-executive director for Board at the AGM in May 2014 when Sir Nigel Rudd, subject six years. I have paid tribute to Mark and Hansel elsewhere in to being elected by shareholders as a director, will become this report and wish them well for the future. Wayne Edmunds Chairman. Sir Nigel is an experienced Chairman and I wish joined the Board as a non-executive director on 7 August 2013 him every success in leading the Board when I retire. and Sir Nigel Rudd joined the Board as a non-executive director and Deputy Chairman on 1 December. The Board considers that its own continuing Michael Harper effectiveness is vital to the Group delivering its strategic Chairman objectives. My role as Chairman has been to provide leadership 4 March 2014 to ensure that it is possible to make high-quality decisions. I am responsible for leading the Board and ensuring ongoing improvement in the Board’s effectiveness. I am supported by all the directors but particularly by Nick Land, as the Senior Independent Director, who meets independently with the other directors and is available if required to meet with shareholders. As a Board, and as individual directors, we strive to continuously improve the effectiveness of the Board and its Committees in support of the Group’s objective of delivering exceptional long-term sustainable value for all our stakeholders.

BBA complete.indb 59 12/03/2014 12:11 Directors’ Report 1. Compliance 3. 2013 Board and Board Committee Meeting Attendance Directors’ Corporate Governance Statement The Board is committed to ensuring appropriate standards The following table shows the attendance of Board and Board of corporate governance are maintained at BBA Aviation plc. Committee members at scheduled meetings. It does not show The Company applies the principles of corporate attendance by non-Committee members at meetings to which governance set out in the UK Corporate Governance Code they were invited. published in September 2012 (the Code), which sets out the Audit standards of good practice in relation to board leadership and and Risk Remuneration Nomination effectiveness, accountability, remuneration and relations with Board Committee Committee Committee shareholders. The Board monitors the evolution of corporate Number of Go to pages 93–95 governance best practice, reviews and updates its procedures scheduled meetings 7 5 4 1 Independent as required and adopts, where relevant, recommendations of Michael Harper 7/7 1/1 governance review bodies. Auditors’ Report Sir Nigel Rudd 1/1 1/1 1/1 The directors can confirm compliance throughout 2013 Simon Pryce 7/7 with all relevant provisions set out in the Code. Mark Hoad 7/7 2. The Board’s Role Nick Land 7/7 5/5 4/4 1/1 The Board recognises its collective responsibility for the Mark Harper 2/2 2/2 1/1 long-term success of the Company. Its role includes providing Susan Kilsby 7/7 5/5 4/4 1/1 effective leadership and agreeing the Group’s strategic aims. Peter Ratcliffe 7/7 4/5 4/4 1/1 It assesses business opportunities and seeks to ensure that Wayne Edmunds 3/3 2/2 2/2 1/1 appropriate controls are in place to assess and manage risk. It is responsible for reviewing management’s performance Hansel Tookes 5/5 4/4 3/3 and oversees senior level succession planning within the Group. Mark Harper retired from the Board and its Committees on 10 May 2013. The Board is responsible for setting the Company’s values and Wayne Edmunds was appointed to the Board and its Audit and standards, ensuring the Company’s obligations to its Risk, Remuneration and Nomination Committees on 7 August 2013. shareholders are met. There were seven scheduled Board meetings in 2013. Hansel Tookes resigned from the Board and its Committees on Details of attendance at scheduled Board and Board Committee 30 September 2013. meetings are shown in the table in section 3. Board meetings Sir Nigel Rudd was appointed to the Board and its Remuneration focus on strategy and financial and business performance. and Nomination Committees on 1 December 2013. Additional meetings are called as required to deal with specific matters. The Board agenda is set by the Chairman in consultation In 2013 there were three additional Board meetings, three with the Group Chief Executive, the Group Finance Director, additional Remuneration Committee meetings and four other Board members and the Group Secretary. additional Nomination Committee meetings. The Board has a formal schedule of matters reserved Directors unable to attend a meeting discuss in advance Go to pages 08–09 to it for decision including approval of matters such as: with the relevant chairman their views on the business of that Board of Directors — strategy and objectives meeting so that their position can be represented. and Executive — Group policies Management — annual budgets 4. The Board and Independence For biographies of each director — dividends At the date of this report, the Board comprises the Chairman, — acquisitions and disposals of businesses (over a certain size) five independent non-executive directors and two executive — expenditure over a certain limit directors who contribute a wide range of complementary skills — financial results and experience. During 2013 the Company announced that — appointment and removal of directors and company immediately following the 2014 annual general meeting, Michael secretary Harper would retire from the Board and that Sir Nigel Rudd would be appointed as Chairman of the Board in his place. This schedule of matters is reviewed by the Board each year. The Board has concluded that Sir Nigel Rudd, Nick Land, Matters outside the scope of this formal schedule are decided Mark Harper, Peter Ratcliffe, Susan Kilsby and Wayne Edmunds by management in accordance with delegated authorities are independent in character and judgement. The Company has approved by the Board and by the Audit and Risk Committee. formal procedures in place to ensure that the Board’s powers to The Chairman and each of the non-executive directors authorise conflicts are operated effectively and such procedures has provided assurances to the Board that they remain fully have been followed throughout 2013. committed to their respective roles and can dedicate the The Board has decided that all Board members wishing to necessary amount of time to attend to the Company’s affairs. continue serving on the Board will retire and stand for re-election at the 2014 AGM. The Board believes that each of the directors should be re-elected by shareholders, because each continues to be effective and demonstrates commitment to their roles.

BBA complete.indb 60 12/03/2014 12:11 During the year the Chairman met the other non-executive The Nomination Committee had one scheduled meeting in 2013 Directors’ Report Directors’ Corporate directors without the attendance of the executive directors on and four arranged at shorter notice. This increased number of Governance Statement a number of occasions. There was a formal meeting of the Senior meetings of the Committee was due to the search for and Independent Director and non-executive directors without the appointment of two new non-executive directors during 2013. Chairman present which included a review of the performance During the year, the Committee continued to discuss matters of the Chairman (taking into account the views of the executive relating to succession planning and talent planning for leadership directors). There were several other occasions during the year succession. Diversity is considered as one aspect of those when discussions between various directors took place on an succession planning discussions, along with, for example, ways informal basis. of developing and strengthening the pipeline of talent within Executive directors must obtain the prior consent of the Group and ways of increasing the interaction between Board the Board before accepting a non-executive directorship in any members and senior members of executive management and other company. Executive directors may retain the fees from talented future executives. any such directorship. No executive directors held non-executive Within the topic of diversity there are a variety of different directorships during 2013, although Simon Pryce was appointed aspects, including professional and industry experience, Go to page 55 to the Council of the University of Reading for a three year term understanding of different geographical regions, ethnic Corporate Social on 1 August 2013. background and gender. The Board does not believe that Responsibility gender quotas (or any other quotas) effectively promote the For gender diversity data 5. Chairman and Group Chief Executive development of appropriate and broad diversity. The Board does Throughout 2013 there has continued to be a clear division of believe that an appreciation of the value that a diverse range of responsibilities between the Chairman and the Group Chief backgrounds brings is an important part of succession planning Executive. Michael Harper, as the Chairman, is primarily at all levels in the Group. The Board does continue to have an responsible for leading the Board and ensuring its effectiveness. aspiration to increase female representation on the Board and, Simon Pryce, as the Group Chief Executive, is responsible for when engaging external search consultants to identify future the development and (after discussion and agreement with candidates for Board roles, such consultants would be requested the Board) implementation of Board strategy and policy and to take full account of all aspects of diversity in preparing their the running of the Group’s business. The written statement of candidate list. the division of responsibilities between the two positions was There is a written framework for the induction of last reviewed by the Board in February 2014. new directors which includes site visits, meetings with senior management and advisers and the provision of corporate documentation. The focus of any induction programme is Michael Harper as Chairman is primarily responsible for: tailored to the background of the new director concerned. — leading the Board and ensuring its effectiveness; The induction of a new executive director would be mostly — setting the Board agenda and ensuring the directors focused on the obligations and requirements of being the receive information in an accurate, clear and timely director of a listed company. An induction for a non-executive manner; director who already holds other listed company directorships — promoting effective decision-making; (as was the case for Wayne Edmunds and Sir Nigel Rudd who — ensuring the performance of the Board, its committees joined the Board during the year) would be more focused on and individual directors are evaluated on an annual introducing the director to the businesses within BBA Aviation. basis; and New non-executive directors are also available to meet major — ensuring that appropriate Board training and shareholders on request. development occurs. Appointments of non-executive directors are made by the Board for an initial term of three years. This term is subject Simon Pryce as Group Chief Executive is responsible for: Go to page 73 to the usual regulatory provisions and continued satisfactory — the development and (after discussion and agreement Directors’ performance of duties following the Board’s annual performance with the Board) implementation of Board strategy Remuneration evaluation. Re-appointment for a further term is not automatic and policy; Report but may be made by mutual agreement. All continuing directors — the running of the Group’s business; For Directors’ fees of the Company will retire and stand for re-election at the — ensuring that the business strategy and activities are 2014 AGM. effectively communicated and promoted within and The fees of the non-executive directors are determined outside the business; and by the Board as a whole on the recommendation of the — building positive relationships with the Company’s Group Chief Executive. No director is involved in deciding his stakeholders. or her own remuneration or fees. Letters of appointment for the non-executive directors are available for inspection by 6. Board Appointments shareholders at each AGM and during normal business hours The Board acknowledges its responsibility for planned and at the Company’s registered office. progressive refreshing of the Board. There is a formal and transparent procedure for the appointment of new directors to the Board, the prime responsibility for which is delegated to the Nomination Committee. Further details about that committee are set out in section 9b below.

BBA complete.indb 61 12/03/2014 12:11 Directors’ Report 7. Information and Professional Development 8. Board Effectiveness Review Directors’ Corporate Governance Statement The Chairman takes responsibility for ensuring the directors receive In the late summer and autumn of 2013 the Chairman, in accurate, timely and clear information, with Board and Committee conjunction with the Senior Independent Director, led the papers being circulated sufficiently in advance of meetings. performance evaluation and appraisal process for the Board, The Board and its Committees are kept informed of corporate its members and its main Committees. The Chairman discussed governance and relevant regulatory developments as they arise with each director individually their replies to a questionnaire and receive topical business briefings. The Board also keeps itself they had previously completed concerning the Board, informed about the Company’s activities through a structured its Committees and their operation. programme of presentations from each of the businesses within The Chairman prepared a report summarising the the Group and from a number of Group functional leaders. findings of the evaluation and this report was discussed by In 2013, senior executives also gave presentations to the the Board as a whole. Board on projects in development and there were presentations In addition, the Senior Independent Director, in from some of the Company’s corporate advisers. consultation with the other non-executive directors and taking In addition, in 2013, Peg Billson and Michael Scheeringa as into account the views of the executive directors, reviewed the Divisional Presidents were both invited to attend all scheduled performance of the Chairman and the performance evaluation Board meetings. and appraisal process as a whole. The Audit and Risk Committee is routinely briefed on Overall, the conclusion from the Board evaluation and accounting and technical matters by senior management and appraisal process was positive, with each individual director by the external auditor. In 2013, briefings included considering contributing actively to the effective performance of the Board the progress of the exposure draft on revenue recognition and and the Committees of which he or she is a member. A number of proposed revisions to the exposure draft on accounting of areas were identified as appropriate for focus in 2014 and for for leases. further continuous improvement. The Remuneration Committee receives updates on The Board has reviewed the objectives it set itself for 2013 remuneration trends and market practices as part of its regularly that included succession planning, senior leadership development scheduled business and in 2013 Towers Watson was invited to and enhancing the Board’s exposure to regulatory issues. The give regular updates covering the proposals and reporting Board considers it has made good progress against its objectives. requirements for executive remuneration. In addition to formal Board meetings, the Chairman 9. Board Committees maintains regular contact during the year with the other The Board operates a Remuneration Committee, a Nomination directors to discuss specific issues. Opportunities exist Committee and an Audit and Risk Committee. Written terms throughout the year for informal contact between Board of reference for each Committee are reviewed each year and members and with members of the senior management team. are available on the Group’s website www.bbaaviation.com Site visits are an important part of the Board’s programme, or on request from the Group Secretary. enabling Board members to meet employees in individual operations. In 2013 the Board held one of its scheduled seven a. Remuneration Committee – Composition meetings in the USA. The meeting in the USA allowed the The composition of the Remuneration Committee during Board to visit a Signature FBO in Washington DC as well as 2013 is set out in the table below. All Committee members are a US Congressman closely involved with business and general independent non-executive directors. Mark Harper stepped aviation and also the Chief Operating Officer of a major customer. down as Chairman of the Committee following his retirement One meeting was held in the south of England and included a from the Board on 10 May 2013 and was replaced as Chairman visit to the H+S operation in Portsmouth. These visits enabled of the Committee by Susan Kilsby. Hansel Tookes resigned from the Board to meet both formally and informally with a number the Committee on 30 September 2013. Wayne Edmunds and of employees based in the area and talk to those working there. Sir Nigel Rudd were appointed to the Committee on 7 August A register of the training that individual directors have 2013 and 1 December 2013 respectively. undertaken is maintained by the Company and this register is During Year periodically reviewed by the Chairman with the director concerned, 01/01/13 Resigned Appointed 31/12/13 04/03/14 as part of the Chairman’s regular review of their training and Wayne Edmunds n/a – 07/08/13 ü ü development needs. If particular training needs are identified, then Mark Harper ü 10/05/13 ––– plans are put in place and the Company provides appropriate Susan Kilsby ü –– ü ü resources for developing and updating the directors’ knowledge Nick Land ü –– ü ü and skills. The Board believes that the identification of individual training and development needs is primarily the responsibility of Peter Ratcliffe ü –– ü ü each individual director, bearing in mind the range of experiences Sir Nigel Rudd n/a – 01/12/13 ü ü and skills that are developed by their differing portfolios. Hansel Tookes ü 30/09/13 ––– All directors have access to the advice and services of the Group Secretary and the Board has established a procedure Mark Harper was Chairman to 10 May 2013. Susan Kilsby has been whereby directors wishing to do so in furtherance of their duties Chairman since that date. may take independent professional advice at the Company’s expense. The Company arranges appropriate insurance cover in respect of legal actions against its directors. The Company has also entered into indemnities with its directors as described 62 on page 90.

BBA complete.indb 62 12/03/2014 12:11 During 2013 the Remuneration Committee had four scheduled Role Directors’ Report Directors’ Corporate meetings and three additional meetings. These meetings were The primary responsibilities of the Nomination Committee are to: Governance Statement minuted by the Group Secretary. Executive directors, the Group — make appropriate recommendations to the Board for the HR Director and Michael Harper attend Remuneration Committee appointment of replacement or additional directors; meetings by invitation. — devise and consider succession planning arrangements for directors and senior executives; and Role — regularly review the structure, size and composition of The Remuneration Committee has two principal functions: the Board and make recommendations to the Board with — making recommendations to the Board on the framework and regard to any changes. Board policy for the remuneration of the Chairman, executive directors and other designated senior executives; and Work of the Committee — determining on behalf of the Board the specific The Nomination Committee evaluates the existing balance remuneration package for each of the executive directors, of experience, skills, knowledge, independence and diversity including pension rights and any compensation payments. of backgrounds on the Board when the Committee considers Board succession planning. The Committee recognises that Work of the Committee promoting an inclusive environment and diverse participation Further details of the work of the Remuneration Committee on the Board requires that the external search consultants used appear in the Directors’ Remuneration Report. by the Board to identify future candidates for a Board role be requested to approach their search with these goals in mind. b. Nomination Committee Other factors that also need to be taken into account are the Composition current and future requirements of the Company and, in the case The composition of the Nomination Committee during 2013 is of a non-executive appointment, the time commitment expected. set out in the table below. Wayne Edmunds and Sir Nigel Rudd The appointment process is initiated by identifying suitable were appointed to the Committee on 7 August 2013 and external search consultants for the vacancy and preparing details 1 December 2013 respectively. Mark Harper and Hansel Tookes of the role and capabilities required for the appointment. (Such resigned from the Committee on leaving the Board on 10 May consultants will be a signatory to the voluntary code of conduct for 2013 and 30 September 2013 respectively. The Nomination executive search firms on gender diversity.) The process differs in its Committee now comprises the Chairman and five independent detail depending on whether the appointment is for an executive non-executive directors. or non-executive position, but the essentials remain the same. JCA Group was appointed to assist with the selection During Year 01/01/13 Resigned Appointed 31/12/13 04/03/14 processes that resulted in the appointment of Wayne Edmunds Wayne and Sir Nigel Rudd in 2013. JCA Group does not have any other Edmunds n/a – 07/08/13 ü ü connection with BBA Aviation plc. JCA Group presented to the Board a list of potential Michael Harper candidates and a shortlist was created through consultation (Chairman) ü –– ü ü amongst Nomination Committee members. The Board as a Mark Harper ü 10/05/13 ––– whole was updated regularly on the status of the appointment Susan Kilsby ü –– ü ü process. The selected candidates met with the Committee Nick Land ü –– ü ü members as appropriate and the Committee made sure that Peter Ratcliffe ü –– ü ü each Board member was given the opportunity to meet any Sir Nigel Rudd n/a – 01/12/13 ü ü short-listed candidates. The Nomination Committee would then meet to finalise Hansel Tookes ü 30/09/13 ––– a recommendation to the Board regarding the appointment. The final decision rests with the full Board. Other directors attend Nomination Committee meetings by Further details about Board appointments and the work invitation. The Nomination Committee meets as required. of the Nomination Committee are set out in section 6 above. During 2013 the Committee had one scheduled meeting and four additional meetings. This was supplemented by informal meetings, individual briefings and meetings between Committee members.

BBA complete.indb 63 12/03/2014 12:11 Directors’ Report c. Audit and Risk Committee During 2013, the Audit and Risk Committee had five scheduled Directors’ Corporate Governance Statement meetings, generally coinciding with key dates in the financial Nick Land reporting and audit cycle. The external auditor and Head of Chairman of the Audit Group Internal Audit attend these meetings which are minuted and Risk Committee by the Group Secretary. The Chairman, Deputy Chairman, Group Chief Executive, Group Finance Director and Group Financial Controller also generally join at least part of the Audit and Risk Committee meetings by invitation. In 2013 the Audit and Risk Committee held three confidential sessions without The Audit and Risk Committee, as can be seen from management present with the Head of Group Internal Audit the description of its role, discharges a number of key and with the external auditor and in addition, the Chairman of responsibilities on behalf of the Board and the Company. the Committee met with the auditor on a number of occasions This includes monitoring BBA Aviation’s financial reporting during the year and through to February 2014. The Committee processes, overseeing the work of the internal audit team Chairman may call a meeting at the request of any Director or and reporting on the independence and objectivity of the Company’s external auditor. the appointed external auditor. While risk strategy and risk appetite are matters for the Role whole Board, the oversight of the processes that underpin The Audit and Risk Committee may consider any matter that risk assessment and internal control are matters that the might have a financial impact on the Group. However, its primary Board delegates to this Committee. For the production of roles are to: the 2013 Report and Accounts the Audit and Risk Committee — monitor and review the effectiveness of the Company’s has been asked by the Board to advise whether the Report internal control and risk assessment; and Accounts, taken as a whole, are fair, balanced and — monitor the effectiveness of the Company’s internal understandable and provide the information necessary for audit function; shareholders to assess the Company’s performance, business — review and assess the Company’s external audit function model and strategy. including the annual audit plan and results of the external The report of the Audit and Risk Committee is set out audit and the independence of the external auditor; below and also in sections 10 -11. — monitor the integrity and audit of the Company’s financial statements and any formal announcements relating to the Nick Land Company’s financial performance, including a review of Chairman of the Audit and Risk Committee the significant financial reporting judgements contained within them; Composition — review the content of the annual report and accounts and The composition of the Audit and Risk Committee during 2013 advise the Board on whether, taken as a whole, they are fair, is set out in the table below. Wayne Edmunds was appointed balanced and understandable and provide the information to the Committee on 7 August 2013. Mark Harper and Hansel necessary for shareholders to assess the Company’s Tookes stepped down as members of the Committee following performance, business model and strategy; and their retirement from the Board on 10 May 2013 and on — establish and oversee the Company’s arrangements for 30 September 2013 respectively. All members of the Audit employee disclosure and fraud prevention arrangements and Risk Committee are independent non-executive directors. within the Company. Nick Land, the Committee’s Chairman, has recent and relevant financial experience and a professional accountancy qualification Work of the Committee as considered desirable by the Financial Reporting Council’s The Committee reviews twice yearly reports on the Group’s key Guidance on Audit Committees issued in September 2012. business risks and the Audit and Risk Committee members In addition, the other Committee members all have experience (all of whom are also members of the Remuneration Committee) of corporate financial matters and Peter Ratcliffe has a are aware of the importance of keeping the appropriateness of professional accountancy qualification. Wayne Edmunds incentive structures under review. The Committee assesses has held a number of senior international finance roles. compliance with the Directors’ Responsibility Statement. During Year There is a twice yearly formal report to the Committee on 01/01/13 Resigned Appointed 31/12/13 04 /03/14 business ethics and compliance, which includes such matters Wayne as the review of the Group’s Disclosure of Unethical Conduct Edmunds n/a – 07/08/13 ü ü Policy, under which staff may, in confidence, raise concerns Nick Land about possible improprieties in matters of financial reporting (Chairman) ü – – ü ü or other matters. In addition, at each meeting the Committee Mark Harper ü 10/05/13 – –– reviews reports on any items arising under that policy. Susan Kilsby ü –– ü ü The Committee is responsible for making Peter Ratcliffe ü –– ü ü recommendations to the Board on matters within its remit, including regarding the remuneration and appointment of the Hansel Tookes ü 30/09/13 – –– external auditor. While the appointment of the external auditor is considered each year, it is the policy of the Committee to review the appointment in greater detail at least every five years, taking 64 into account a number of factors, including audit effectiveness at

6758_BBA_AR PART 2 front p22-68.indd 64 14/03/2014 18:17 both operating company and Group-level; quality, continuity (i) Recording of Exceptional Items within Operating Profit Directors’ Report Directors’ Corporate and depth of resources; and expertise and competitiveness of The Group’s policy is to include certain items within operating Governance Statement fees. The appointment of the Senior Statutory Auditor is also profit within a middle column within the income statement. rotated every five years and, having completed his five years, These items relate to restructuring activities, environmental Nigel Mercer rotated off and was replaced by Ed Hanson on costs associated with businesses which have been exited, completion of the 2012 Audit. Whilst the company has kept transaction costs associated with acquisitions and disposals under review the relationship and effectiveness of the external and the amortisation of acquired intangibles. auditor, no formal tender of the external audit has been carried The Committee was satisfied that the policy had been out since Deloitte’s appointment. The Committee is mindful of applied consistently and these items had been properly the requirements under the Code that the Audit should be put defined in the Strategic Report and the financial statements out to tender every ten years and has concluded that it will such that the user of the accounts can understand the impact re-tender the external audit during the coming year. on reported performance. The Audit and Risk Committee discharges its responsibilities through the review of written reports circulated (ii) Accrual for Current Taxation Liabilities in advance of meetings and by discussing these reports and As part of the process of concluding upon the Group’s any other matters with the relevant auditors and management. financial statements, management is required to calculate tax Topics covered by the Committee during 2013 and to liabilities. As detailed in “Critical accounting judgements and date in 2014 included: key sources of estimation uncertainty in Note 1”, this process — review of any significant financial reporting issues and involves estimates of the current tax exposures and potential judgements in respect of the half-year results and year-end recoveries. While the Group aims to ensure that these accruals report and accounts (described in more detail in section are accurate, the process for agreeing tax liabilities with the 10 below); tax authorities can take several years. Judgement is therefore — review of any significant matters raised by the internal required in determining the provision for tax. auditors; The Committee addressed these issues through a range — consideration of the audit fee and the balance between of reporting from senior management during the year audit and non-audit fees; and a process of challenging the appropriateness of — assessment of the risk of the possible withdrawal of Deloitte management’s views including the degree to which they are LLP from the external auditor market; supported by external professional advice as well as receiving — annual review of the terms of reference of the Committee, a report from Deloitte LLP on their findings from their audit of the schedule of the Committee’s agenda items for the procedures. During the year there was some progress in forthcoming year, of the non-audit services policy and clarifying the position in respect of past tax years; as a result of BBA Aviation’s matrix of authority levels; the amount of accruals held for current liabilities has reduced — discussion of steps taken to mitigate Euro zone risk and by $11.2 million. consideration of the stability of core relationship banks; — discussion of the further development of Group Internal (iii) Provision for excess and obsolete inventory Audit’s overall strategy and approach including the The group holds significant inventory across its operations conclusions from an enterprise risk assurance mapping with $199.7 million of net inventory at 31 December 2013. project; This inventory is held at cost net of a provision for slow — auditor independence and audit effectiveness (described moving or obsolete inventory. As detailed in “Critical in more detail in section 11 below); and accounting judgements and key sources of estimation — system of internal control (described in more detail uncertainty in Note 1”, key to the estimation of this in section 11 below). provision is an assessment of the remaining lives of the engine platforms, the estimated frequency of overhauls 10. Significant Financial Reporting Issues Considered by the and the expected future usage of inventory based upon Audit and Risk Committee past experience and the level of write-offs in previous years. To aid its review, the Committee considers reports from the During the year management undertook a review of the Chief Financial Officer and Group Controller and also reports consistency in the estimations of the excess and obsolete from the outcome of the half-year review and annual audit. The inventory of engine and aircraft components across the Committee supports Deloitte LLP in displaying the necessary Aftermarket Division. An amendment was made to the policy professional scepticism their role requires. The primary areas of which is designed to achieve a greater level of consistency judgement considered by the Committee in relation to the 2013 across the Division, as well as more precisely defining the Financial Statements and how these were addressed were: basis for provisioning. — recording of exceptional items within operating profit; The Committee carefully examined the revised policy and — accrual for current taxation liabilities; the impact of its application as well as receiving a report from — provision for slow moving and obsolete inventory; and Deloitte LLP on their findings from their audit procedures. — recognition of revenue in respect of sale and leaseback transactions. (iv) Recognition of Revenue in Respect of Engine Sale and Leaseback Transactions These issues were discussed with management and the external During the year the engine repair and overhaul business sold auditor in the September meeting when signing off on the and subsequently leased back a number of engines in the auditor’s plan for the year end and no new areas were identified normal course of its business; these leases have been treated subsequently. as operating leases. 65

BBA complete.indb 65 12/03/2014 12:11 Directors’ Report In concluding on this treatment management have considered If fees for non-audit projects within the scope of permitted tax Directors’ Corporate Governance Statement the terms of the leases and have sought third party valuation to services are expected to exceed £250,000 in a particular year, assess the balance of transfer of risks and rewards with the lessor. then the Audit and Risk Committee Chairman is required to The Committee addressed this matter through receiving reports pre-approve each project. In any event, specific project approval from management as well as receiving a report from Deloitte LLP is required by the Committee Chairman for any such project on their findings from their audit procedures. where estimated fees exceed £100,000. Pre-approval is required for non-tax projects where fees are estimated to exceed £25,000. 11. Audit and Accountability These limits are also reviewed annually. a. Auditor Independence and Audit Effectiveness Deloitte LLP have confirmed that all non-audit services Central to the Audit and Risk Committee’s work is the review they performed during the year were permitted by APB Ethical and monitoring of the external auditor’s independence and Standards and do not impair their independence or objectivity. objectivity and the effectiveness of the audit process. On the basis of their own review of the services performed, The Committee carried out a formal effectiveness the requirement of pre-approval and the auditor’s confirmation, assessment in respect of work carried out during the year the Committee is satisfied that the non-audit services currently by the external auditor, including: provided by Deloitte LLP do not impair their independence — the continuity and objectivity of the audit partners and and objectivity. audit team; — effectiveness of audit planning and execution; b. Systems of Internal Control — the role of management in ensuring an effective audit; Overall responsibility for the Group’s system of internal control — communication with and support of the Audit & Risk and for reviewing its effectiveness rests with the directors. Committee; and Management is accountable to the directors for monitoring this — the formal reporting of the auditor. system and for providing assurance to the directors that it has done so. The system of internal control is essentially an ongoing The assessment was completed with input in the form of a process embedded in the Group’s businesses for identifying, survey of the key financial management team including the evaluating and managing the significant risks faced by the Divisional CFOs, the Group Financial Controller and Tax Director, Group, including social, environmental and ethical risks. The together with the Chairman of the Audit and Risk Committee. Group considers that it has adequate information to identify Other members of the Audit and Risk Committee also and assess significant risks and opportunities affecting its long input their views and it was concluded that the external audit and short-term value. for 2013 had provided appropriate focus and challenge on the This ongoing process has been in place for the year ended primary areas of audit risk and assessed the quality of the audit 31 December 2013 and up to 4 March 2014 and the directors to be good. The Audit and Risk Committee has also carried out can therefore confirm that they have reviewed the effectiveness a self-assessment and believes that it has satisfied the in accordance with the internal control requirements of the Code requirements of the Code and the Guidance on Audit throughout that period. Committees published by the Financial Reporting Council in The Group’s internal system of control is reviewed annually September 2012. The Committee has confirmed that during the by the directors and accords with the guidance issued by the year it had formal and transparent arrangements for considering Financial Reporting Council in October 2005: “Internal Control: corporate reporting and risk management and internal control Revised Guidance for Directors on the Code” (known as the principles and for maintaining an appropriate relationship with “Turnbull guidance”). The system is designed to manage rather the Company’s auditor. than eliminate the risk of failure to achieve business objectives. One of the safeguards to ensure auditor objectivity It can provide reasonable but not absolute assurance against Go to page 21 and independence is the Group’s policy on the provision of material misstatement or loss, to the extent that is appropriate, Our Risks non-audit services by its external auditor. The policy is reviewed taking account of costs and benefits. For more detail on each year and since December 2012, the policy prohibits the The principal risks and uncertainties which the Group principal risks Group’s external auditors from carrying out remuneration faces are summarised on page 21, together with a description of consultancy and tax planning work for the Group. The external their potential impact and mitigations in place. The main features auditor is also prohibited from carrying out a number of other of the Group’s internal control and risk management systems are services for the Group such as book-keeping, internal audit, listed below. valuations, actuarial services and financial systems design and implementation. Services which the external auditor may be 1. The risks identified through a detailed written self- permitted to carry out include assurance services such as assessment process carried out by division and by function reporting accountant work and tax compliance services. The are recorded on a risk register together with the mitigations Company’s policy is not to use the external auditor for acquisition in place. This covers a range of different types of risks, such as: and due diligence work. However, where the Group considers — business; it appropriate or where conflicts arise, suppliers other than the — financial; preferred supplier may be asked to tender. This would only — compliance; include the external auditor in unusual and exceptional — operational; and circumstances. — other categories of risks including health, safety and Non-audit fees paid or due to the external auditor are environmental risks. regularly reviewed by the Committee and those paid in 2013 are set out in note 2 to the Consolidated Financial Statements. 66

BBA complete.indb 66 12/03/2014 12:11 In addition, the risks identified are plotted on risk maps and 9. A matrix defines the levels of authority for the Group’s senior Directors’ Report Directors’ Corporate both the self-assessments and the risk maps are reviewed by executives and their direct reports in relation to acquisitions, Governance Statement Group Internal Audit and by senior management at review capital expenditure, commercial and employee contracts meetings held with each business. The outcome from these and treasury matters. This is authorised by the Audit and Risk reviews is then discussed twice each year at meetings of the Committee on behalf of the Board and is reviewed on an Executive Management Committee, with the results being annual basis. Compliance is reviewed as part of the internal presented by the Group Finance Director to the Audit and audit process. Risk Committee, which in turn reviews the effectiveness of the Group’s system of internal control on behalf of the Board. 10. All significant acquisitions and disposals of companies Based on this information the Board reviews the risks and or businesses are approved by the Board. confirms they are satisfied that the risks are appropriately mitigated. If this is not the case they request that 11. A Group policies manual sets out policies and procedures management take further action. concerning: business ethics, bribery and corruption, gifts and entertainments, equal opportunities and anti- 2. An organisational structure is in place at both head office harassment, competition law, legal policy, data privacy, and divisional level which clearly defines responsibilities for corporate social responsibility, market disclosure and operational, accounting, taxation, treasury, legal, company communications and share dealing. A review of compliance secretarial and insurance functions. with such policies by Group companies is carried out twice a year and senior executives are also required to confirm 3. An internal audit function undertakes a programme of compliance with certain policies twice a year. Group policies risk-based reviews of controls and business processes. are complemented by divisional and Company-led initiatives The role of internal audit is defined in a Group Internal Audit and are supplemented by the Group’s Disclosure of Unethical Charter and this includes its terms of reference, the standards Conduct Policy which includes a 24-hour “hotline” available which it adheres to, the scope and coverage of its work and its to all employees. This is supported by a formal investigation reporting processes. The Audit and Risk Committee receives protocol and regular reporting to the Audit and Risk a report from internal audit at each meeting which includes Committee as part of the twice yearly report on Business opinions on the adequacy and effectiveness of controls by Ethics and Compliance. The Ethics Implementation Policy site, together with a summary of key issues, work schedules seeks to codify the overarching principles and processes that and details of any action required. In accordance with the UK underlie the various elements set out in more detail in the Corporate Governance Code, the Audit and Risk Committee Code of Business Ethics and the policies on bribery and monitors and reviews the effectiveness of internal audit using corruption and gifts and entertainments. Compliance with outside specialists as well as self-assessment techniques. all these policies and with the Group’s procedures concerning the appointment and remuneration of foreign 4. A Group Finance Manual details accounting policies and agents is reviewed as part of the ongoing BBA Aviation financial controls applicable to all reporting units. The Group Internal Audit Programme. The effectiveness of these policies accounting policies are aligned with International Financial is assessed alongside the risk review process described in Reporting Standards and compliance with these policies is item 1 above. reviewed as part of the internal audit process. 12. A Group Safety Management System Manual details policies, 5. An annual budgeting exercise is carried out to set targets standards and procedures which are applicable throughout for each of the Group’s reporting units. the Group. Annual self-assessment and/or audits are carried out at company level against these Group standards. 6. Detailed management accounts are submitted monthly An executive summary Health, Safety and Environmental to management which measure actual performance against (HSE) report is tabled at each meeting of the Executive budget and forecasts. The monthly forecasts of sales, profits Management Committee. The Board also receives a and operating cash are updated on a quarterly basis. summary HSE report in addition to updates on HSE activities. A monthly report is provided to the Board, based on These reports cover all Group companies and are prepared these management accounts, highlighting key issues and by the internal Group HSE function. Key HSE performance summarising the detailed financial information provided by metrics are reviewed and verified annually by an the operating units. The integrity of management accounts independent third party organisation. Senior managers’ with the underlying financial records is subject to review performance and related financial incentives are tied in part as part of the internal audit process. to their success against selected annual HSE improvement objectives. Further details about HSE matters are set out in 7. Capital expenditure is controlled by means of budgets, the Corporate Social Responsibility Report 2012-2013 on authorisation levels requiring the approval of major projects the BBA Aviation website. BBA Aviation’s Group Internal by the Board and by post-investment appraisals. The lessons Audit team includes a number of questions on CSR matters learned from the post-investment appraisals are also shared in the annual Control Risk Assessment questionnaire which with members of senior management. is completed by each of the operating businesses. The responses are reviewed and collated by Group Internal Audit 8. Defined procedures are laid down for investments, currency and then discussed by the Group’s CSR Steering Committee and commodity hedging, granting of guarantees and use and used in the development of future CSR action plans. of treasury products. 67

BBA complete.indb 67 12/03/2014 12:11 Directors’ Report 12. Shareholder Relations Directors’ Corporate Governance Statement The Board as a whole is routinely kept up to date on the views of BBA Aviation’s major shareholders. The executive directors undertake an annual programme of meetings with banks, institutional shareholders, fund managers and analysts to maintain a continuing dialogue with the Company’s providers of finance. The Board receives formal written reports from its brokers (as well as reports from the executive directors) regarding the views of shareholders following its preliminary and half yearly results announcements and at other times as appropriate. All non-executive directors, including the Senior Independent Director, are available to meet with major shareholders. The Chairman wrote to major shareholders ahead of the 2013 AGM offering them the opportunity to raise any issues or questions. The Chairman of the Remuneration Committee and the Chairman also maintain contact as required with major shareholders about directors’ remuneration matters. The Board considers that its non-executive directors, including its current Senior Independent Director, have a good level of understanding of the issues and concerns of major shareholders, as required by the Code. The Company’s AGM is used as an opportunity to communicate with private investors. It is intended that notice of the AGM and related papers are sent to shareholders at least 20 working days before the meeting. Michael Harper as Chairman of the Board and the Nomination Committee, Nick Land as Chairman of the Audit and Risk Committee and Senior Independent Director, and Susan Kilsby as Chairman of the Remuneration Committee will each be available to answer questions, as appropriate, at the AGM. Shareholders are given the opportunity of voting separately on each proposal. The Company counts all proxy votes cast in respect of the AGM and makes available the proxy voting figures (for, against, at discretion and “vote withheld”) on each resolution. The voting results of the AGM, together with the details of proxy votes cast prior to the meeting, are made available on request and on the Company’s website. The results of the AGM are announced to the market via a Regulatory News Service. Directors’ Corporate Governance Statement approved by the Board on 4 March 2014 and signed on its behalf by:

Michael Harper Chairman

BBA complete.indb 68 12/03/2014 12:11 Directors’ Report Directors’ Remuneration Report Directors’ Remuneration Report

Susan Kilsby You will have read in the Chairman’s letter that we have Chairman of the streamlined our business into two divisions. This enables much Remuneration greater cross-business collaboration along with process and Committee practice improvement. The financial highlights for 2013 are shown on page 4. The Remuneration Committee recognises that the Company has made good progress in 2013 and delivered further market outperformance and an improvement Annual Statement in key operating metrics. The reward outcomes for the In May 2013 I was very pleased to accept the appointment executive directors reflect the progress that has been made. as Remuneration Committee Chairman and I am delighted In accordance with the new regulatory framework, to introduce our first Directors’ Remuneration Report under shareholders will be asked to vote on the Annual Report on the new reporting and voting regime. I would also like to thank Remuneration and on the Directors’ Remuneration Policy Mark Harper the former Remuneration Committee Chairman at the 2014 AGM. The vote on the Annual Report on for his contribution to the Committee over recent years. Remuneration is an advisory vote and the vote on the Our Remuneration Policy is set out in detail in this report. Directors’ Remuneration Policy is binding. The Remuneration Committee believes that the design of Looking forward, in 2014 we are undertaking a more executive pay should be simple, understandable and rewards fundamental review of the structure of remuneration to performance that promotes the effective execution of the ensure that performance measures for both short and Group’s long-term strategy. long-term reward are appropriate for our business. Any The Policy needs to reflect our vision, mission and values potential changes will be designed to strengthen the link and should be designed to retain and motivate key executives, between pay and the effective execution of our strategy, encouraging them to take actions that will deliver exceptional recognising the cyclical nature of our business and that over long-term sustainable value for all our shareholders and 75% of our operations are outside the UK. Any changes would stakeholders. be voted on at the 2015 AGM. During the course of 2013, the Remuneration Committee As we refine our reward arrangements, we will look has reviewed our existing remuneration arrangements and has forward to continued engagement with shareholders as taken steps to simplify our existing plans. appropriate. We have for some time recognised that the matching element of the deferred bonus plan is very similar to an award under our long-term incentive plan. We have concluded that Susan Kilsby for ease of understanding and to separate short-term, deferred Chairman of the Remuneration Committee and long-term incentive arrangements more effectively, 4 March 2014 the value of the matching element of the deferred bonus plan will be transferred into the long-term incentive plan. This change has no impact on the overall value of the remuneration package.

BBA complete.indb 69 12/03/2014 12:45 Directors’ Report Directors’ Remuneration Report Annual Report on Remuneration for 2013

The Remuneration Committee and its work The Board is responsible for remuneration policy and has delegated prime responsibility for the implementation of that Policy to the Remuneration Committee. The Remuneration Committee is a Board Committee consisting exclusively of independent non-executive directors and its meetings are minuted by the Group Secretary. No individual is directly involved in the determination of, or votes on, any matter relating to their own remuneration. The composition of the Remuneration Committee during 2013 was: — Wayne Edmunds (from 7 August 2013); — Mark Harper (until 10 May 2013); — Susan Kilsby; — Nick Land; — Peter Ratcliffe; — Sir Nigel Rudd (from 1 December 2013); and — Hansel Tookes (until 30 September 2013). Mark Harper was Remuneration Committee Chairman until he retired at the AGM on 10 May 2013 whereafter Susan Kilsby took over the Chairmanship of the Committee. The Committee is responsible for, among other things: — determining remuneration strategy; — determining executive directors’ remuneration; — determining the remuneration of the Chairman; — selecting performance measures and setting targets for the short-term and long-term incentive plans and performance-related share plans; — reviewing proposals in respect of other senior executives; and — overseeing any major changes in employee incentive structures throughout the Group.

Further information on the work of the Remuneration Committee is set out in the Directors’ Corporate Governance Statement on page 62. Following a tendering process, Towers Watson was formally re-appointed during the year as the Remuneration Committee’s adviser. In 2013 Towers Watson provided advice and market analysis relating to the executive directors and other senior executives. In addition, Towers Watson provided general advice in relation to: — remuneration strategy; — background information about remuneration trends; and — calculations of total shareholder return (TSR) in connection with the legacy Deferred Bonus and long-term incentive plans.

Towers Watson have also provided advice to the Company during the year in respect of US healthcare provision, US pension administration and actuarial services and remuneration practice in respect of matters including non-executive directors’ fees. Towers Watson is a member of the Remuneration Consultants Group and is committed to that group’s voluntary code of practice for remuneration consultants in the UK. This includes processes for ensuring integrity and objectivity of advice to the Remuneration Committee and that any potential conflicts are effectively managed. As part of the Board evaluation process (see page 62 for more detail) the Remuneration Committee also confirmed it was satisfied that it was receiving independent advice from Towers Watson. The fees paid by the Company to Towers Watson during the year for advice to the Remuneration Committee totalled £57,700. During the year, the Remuneration Committee also consulted the Chairman of the Board, the Group Chief Executive, the Group Finance Director, the Group HR Director and the Group Secretary in connection with the Committee’s work within their particular areas of knowledge and expertise. It is expected that the Committee will wish to continue to consult with this group in 2014 and that they will continue to be invited to attend Committee meetings when appropriate. Additionally, the Chairman of the Board, the Chairman of the Remuneration Committee and the Group HR Director reported back to the Remuneration Committee on their dialogues with shareholders and other stakeholders. The Directors’ Remuneration Report (DRR) for the year ended 31 December 2012 was approved at the 2013 annual general meeting on a show of hands. The proxy votes lodged in respect of this resolution were:

Proxy votes for % for Proxy votes against % against Proxy votes lodged Votes withheld Approval of 2012 DRR 399,632,695 99.7 1,188,131 0.3 400,820,826 2,191,403

The proxy votes for included 117,230 shares over which the Chairman had discretion. A vote withheld is not a vote in law and accordingly these are not included in the calculation of the percentages shown above.

BBA complete.indb 70 12/03/2014 12:45 Historical Cumulative TSR Performance Directors’ Report Directors’ Remuneration Report The graph below shows that the Company’s TSR performance since the end of 2008 has significantly outperformed the FTSE 250 and the FTSE 350 Industrial Transportation Index. The Company has previously used the FTSE 350 Industrial Transportation Index as a suitable comparator. The Company has reviewed the comparator and believes that the FTSE 250 Index is a more suitable broad based equity index of which the Company is a constituent member. In the interests of consistency and transparency both indexes are shown below. Go to pages 04 and 18–19 Growth in the value of a hypothetical holding over five years. For information about the FTSE 350 Industrial Transportation Index comparison based on 30 trading day average values. key financial highlights and the KPIs.

BBA Aviation TSR v FTSE 250 and FTSE 350 Industrial Transportation Index

Value of a hypothetical £100 investment

£600 £565 £550 £500 £450 £400 £350 £300 £300 £293 £250 £200 £150 £100

2008 | 2009 | 2010 | 2011| 2012 | 2013 |

BBA Aviation FTSE 250 FTSE 350 – Industrial Transportation Index

Table setting out CEO’s pay with various figures from the single total figure table Total remuneration and variable pay pay-out as % of maximum 2009 2010 2011 2012 2013 Total single figure £’000 1,232 1,800 2,689 1,855 1,718 Bonus total and as percentage of maximum 453 460 566 328 458 88.0% 70.1% 83.5% 47.0% 63.7% Long-term total and percentage vesting against 69 580 1,453 824 563 maximum 12.5% 56.8% 55.5% 68.6% 42.4%

BBA complete.indb 71 12/03/2014 12:45 Directors’ Report Remuneration for 2013 The choice of performance conditions, and their respective Directors’ Remuneration Report This section of the report explains how BBA Aviation’s weightings reflected the Committee’s belief that they would remuneration policy has been implemented during the drive action to deliver exceptional sustainable value for our financial year. shareholders and other stakeholders. The Remuneration Committee recognises that BBA In light of the performance against operating profit, Aviation has made good progress in 2013 and delivered further free cash flow and personal targets the Committee concluded market outperformance and an improvement in key operating that 63.7% of maximum bonus is payable to the Group Chief metrics, as well as continuing to effectively execute the Executive and 61.3% of maximum bonus is payable to the Group’s growth strategy. The remuneration outcomes for the Group Finance Director. executive directors reflect the progress that has been made. In 2013, financial performance objectives represented The paragraphs below describe the separate elements 84% of bonus opportunity and personal objectives represented of remuneration disclosed in the single figure table. 16%. Fifty per cent of annual bonus received in 2014 for 2013 performance is paid in cash with the remaining 50% Base Salary and Fees compulsorily deferred into shares. The base salary effective from 1 January 2013 for Simon Pryce was £575,000 and for Mark Hoad was £325,000. Long-Term Awards The fees for the Chairman and the non-executive directors DBP that applied from 1 January 2013 are set out in the single figure Half of each bonus in respect of 2010 paid in early 2011 was paid table below. Wayne Edmunds and Sir Nigel Rudd were in cash and half was deferred for a period of three years. The appointed during the year on the basic non-executive director deferred element of the bonus was converted into shares and fee. The fee for Sir Nigel Rudd when he becomes chairman will be released to directors shortly after the third anniversary after the AGM in May 2014 is £250,000 p.a. and is fixed until of the award. As permitted by the rules of the scheme, the December 2017. Remuneration Committee agreed that dividends will be awarded on the deferred element after the date on which Pension the risk of forfeiture lifts. The Company made a cash payment equal to 20% of Simon The deferred bonus converted into shares was subject to Pryce’s base salary in lieu of a contribution by the Company a 1:1 match of conditional shares. The awards are set out in Table to a pension scheme. Mark Hoad, who participates in the 4C on page 77. The three-year ROIC targets applicable to this Company-sponsored Defined Contribution Plan, received award are set out on page 78. a sum equal to 20% of his base salary as a pension contribution. Over the three-year period, the Company achieved pre-tax ROIC growth of 10.23% that will result in a vesting of 36.7% of Other Benefits the awards. Other benefits for the year, for each executive director included The deferred bonus that vested in 2013 is shown in the a company car allowance, private medical insurance, death in 2012 line of the single figure table because the performance service benefit, annual holiday, sick pay, an annual health check period ended on 31 December 2012. and gym membership. LTIP Annual Bonus The LTIP awards granted in 2011 are shown in Table 4B on page The annual bonus for the period to 31 December 2013 for 76 and the earnings per share performance conditions are shown executive directors was based on the achievement of on page 78. The EPS performance is to be measured over the $200.1 million of Group operating profit and $146.5 million of three-year period ended 31 December 2013. The Remuneration Group free cash flow. The Board has decided that the targets Committee concluded that the LTIP awards would vest at 44% for 2013 or 2014 should not be disclosed while they remain of their maximum. commercially sensitive and will keep this under review. The LTIP that vested in 2013 is shown in the 2012 line of the The Committee judged that Simon Pryce would receive single figure table because the performance period ended on 90% of his maximum and Mark Hoad would receive 75% of his 31 December 2012. maximum for achievements of personal strategic objectives.

BBA complete.indb 72 12/03/2014 12:45 Directors’ Report Directors’ Remuneration Report Table 1 – Directors – Single Total Figure Table (£’000)

Remuneration Totals Longer-term incentive vesting for Value LTIP/ Received for Deferred for performance DBP vesting relevant year relevant year over multi Overall single Director Year Salary & fee Benefits Bonus amount Pension Other performance performance year periods figure total Simon 2013 575 20 458 563 115 0 939 229 563 1,731 Pryce 2012 558 20 328 824 112 14 854 164 838 1,856 Mark 2013 325 17 249 193 65 0 531 125 193 849 Hoad 2012 300 17 176 160 60 25 465 89 184 738

Michael 2013 196 ––––– 196 –– 196 Harper 2012 191 ––––– 191 –– 191 Sir Nigel 2013 4 – – – – – 4 – – 4 Rudd 2012 –––––––––– Nick 2013 63 ––––– 63 –– 63 Land 2012 61 ––––– 61 –– 61 Susan 2013 54 ––––– 54 –– 54 Kilsby 2012 34 ––––– 34 –– 34 Peter 2013 48 ––––– 48 –– 48 Ratcliffe 2012 46 ––––– 46 –– 46 Wayne 2013 19 ––––– 19 –– 19 Edmunds 2012 –––––––––– Hansel 2013 49 ––––– 49 –– 49 Tookes 2012 58 ––––– 58 –– 58 Mark 2013 22 ––––– 22 –– 22 Harper 2012 59 ––––– 59 –– 59

Notes 1 Taxable benefits for Simon Pryce and Mark Hoad include a cash allowance in lieu of a company car and private medical insurance. 2 Half of the bonus for Simon Pryce and Mark Hoad in respect of 2013 is subject to mandatory deferral. 3 The LTIP and DBP awards vesting in 2013 are shown in the comparative figures for 2012 as the performance conditions were satisfied in 2012. The LTIP award was subject to an EPS performance condition and the awards vested at 67.7% of maximum.BP The D award was subject to a Total Shareholder Return condition and vested at 75% of the maximum. 4 The LTIP and DBP awards granted in 2011 and due to vest in 2014 are explained in detail together with the assumptions on page 72. The vesting value of the long-term awards are based on the closing share price on 25 February 2014 which was 324.2p. The values will be restated in the 2014 Directors’ Remuneration Report using the share price on the vesting date. 5 The Company’s pension contribution for Simon Pryce and Mark Hoad is 20% of basic salary. During the year Simon Pryce received a contribution by the Company to a pension scheme. During the year the Company paid £50,000 into Mark Hoad’s defined Contribution plan and the Company’s contribution in excess of this was paid in cash. 6 The disclosure in the ‘Other’ column represents the gain on approved share options and in Mark Hoad’s case also included some Save as You Earn Options exercised in 2012.

6758_BBA_AR PART 3 front p69-91.indd 73 14/03/2014 18:18 Directors’ Report Awards Made During the Year Directors’ Remuneration Report DBP Half of the bonus paid in 2013 in respect of performance in 2012 was subject to compulsory deferral and paid in the form of a conditional share award. The conditional award was subject to the individual being employed by the Group on the third anniversary of the award. Matching awards were granted on a one for one basis by reference to the amount of bonus deferred. The details of the DBP awards made in 2013 are set out in Table 2 below.

LTIP Simon Pryce was awarded an LTIP of 150% of his salary and Mark Hoad was awarded an LTIP of 100% of his salary. The details of the LTIP awards made in 2013 are set out in Table 2 below.

Performance Conditions A ROIC performance condition is applied to half of the DBP matching Award and the LTIP Award and the EPS performance condition is applied independently to the other half of those awards. The performance conditions applied to each award are set out on page 78.

Table 2 – Scheme Interests Awarded during the Financial Year Face Value of Award Percentage if minimum End of performance performance Director Description Shares £ targets met period Simon Pryce LTIP – Conditional Award 290,436 832,593 25% 31/12/2015 LTIP – Linked Award 10,464 25% 31/12/2015 29,997 ESOP – Approved Option 10,464 25% 31/12/2015 DBP – Conditional Shares 57,160 163,861 100% 31/12/2015 DBP – Matching Shares 57,160 163,861 25% 31/12/2015 Mark Hoad LTIP – Conditional Award 102,936 295,086 25% 31/12/2015 LTIP – Linked Award 10,464 25% 31/12/2015 29,997 ESOP – Approved Option 10,464 25% 31/12/2015 DBP – Conditional Shares 30,714 88,048 100% 31/12/2015 DBP – Matching Shares 30,714 88,048 25% 31/12/2015

Notes 1 Each of the above awards were made on 28 May 2013. The grant price was £2.8667 which was the average of the middle market closing price on the three trading days prior to the grant. 2 The LTIP Conditional Award is based on a fixed percentage of Salary (150% for Simon Pryce and 100% for Mark Hoad). The Conditional Award was reduced by £29,997 allowing the same value to be awarded as an Approved Share Option under the Executive Share Option Plan and as an LTIP Linked Award. Under normal circumstances, the Linked Award will only vest to the extent needed to provide sufficient funds to meet the exercise price of the Approved Share Option. The face value for both the Linked Award and the Approved Option are disclosed above – the combined face value of these two awards is £29,997. 3 The DBP Conditional Award is calculated by reference to the amount of the bonus deferred in respect of performance in 2013 and is included in the single figure table above. 4 The performance conditions for these awards are set out on page 78.

Payments to Past Directors No payments have been made in 2013 to past directors in respect of their services as a director of the Company. Bruce van Allen ceased to be a director on 8 January 2009 and continued to be employed by the Company until 31 March 2011. Mr van Allen’s bonus in respect of 2009 was subject to deferral with a matching award under the deferred bonus plan in 2010 and that award was released and vested to Mr van Allen in May 2013.

Loss of Office Payments No directors received any payments for loss of office during the year.

BBA complete.indb 74 12/03/2014 12:45 Directors’ Shareholdings and Interests Directors’ Report Directors’ Remuneration Report In accordance with the Company’s internal shareholding guidelines, the executive directors are expected to hold the equivalent of their annual salary in shares although there are no formal shareholding requirements in the articles of association of the Company. Both Simon Pryce and Mark Hoad have exceeded this expectation throughout the financial year and each owned as at 31 December 2013 shares to the value of over 610% and 240% respectively. The calculation includes shares held by directors and their connected persons and, in accordance with the internal guidelines, conditional shares in the Deferred Bonus Plan where the risk of forfeiture has lifted. Table 4A on page 76 shows the beneficial interests held by directors. Tables 4B – 4D on pages 76–77 of the report show the interests in schemes. The performance conditions are set out on page 78.

Relative Importance of Spend on Pay The Board recognises that the level of spend on pay is driven partly by being within the service sector and the high number of employees relative to our size. The remuneration receivable by employees reflects this. The comparators below have been selected as they illustrate allocation of ‘profits’ between amounts payable to directors, amounts returned to shareholders by way of dividends and amounts available for re-investment.

2013 Relative Importance on Pay Spend

Remuneration paid to or receivable by £315m all employees (i.e. wages and salary)

Remuneration paid to £3m or receivable by all directors

Distributions to shareholders £45m by way of dividend/buyback

Increase in retained earnings £49m

£0m | £50m | £100m | £150m | £200m | £250m | £300m | £350m |

Table 3 – Percentage change in remuneration of Chief Executive Officer and a relative comparator group of employees The table below shows the movement in total remuneration for the Chief Executive between the current and previous financial year compared to that of the total remuneration costs of relevant comparator employees as a whole. Relevant employees are employees of BBA Aviation plc and its subsidiaries who are in banded grades 1-4 – about 100 of the Group’s senior leaders as the Board believes this is a more suitable comparator group. The Chief Executive’s reward is made up of a larger proportion of variable pay than employees within this comparator group.

Year ended Year ended 31 December 31 December Percentage 2013 2012 Change Chief Executive base salary 575 558 3% Relevant average comparator employees’ base salary 116.6 112.9 3.3% Chief Executive taxable benefits 20 20 0% Relevant average comparator employees’ taxable benefits 8.45 8.12 4.1% Chief Executive annual bonus 458 328 39.6% Relevant average comparator employees’ annual bonus 51.1 40.1 27.4%

BBA complete.indb 75 12/03/2014 12:45 Directors’ Report Implementation of Policy in 2014 Directors’ Remuneration Report The policy on remuneration is due to be formally approved by shareholders at the May 2014 AGM. In December 2013 the salaries of the executive directors were reviewed by the Remuneration Committee. It was agreed that the base salary for Simon Pryce to take effect from 1 January 2014 would increase by 2.5% to £589,375. Mark Hoad’s salary will be unchanged at £325,000 following three years of larger than normal increases as set out in previous reports. The average base salary increase across the banded senior management population was 2.30% across the Group. It is expected that the base salaries for executive directors will be reviewed in December 2014. Non-executive directors fees have increased by 15% to £55,000 and took effect from 1 January 2014. These are not expected to be reviewed again until December 2016. The Committee does not expect to change the Pension and Benefit arrangements for the executive directors in 2014. For 2014 the Committee has determined that the annual bonus opportunity for executive directors and senior executives will again be contingent on meeting both financial targets and personal objectives. The Committee has reviewed targets for the year to ensure they remain appropriately stretching and relevant to the Company’s business strategy. In 2014, financial performance objectives will again represent 84% of bonus opportunity and personal objectives 16%. The Committee will ensure that the performance measures for any future awards made under the LTIP remain appropriately stretching in light of the Company’s expectations of performance and those of external analysts. In 2014, Simon Pryce’s LTIP award will be 190% of salary. As noted in the Chairman’s statement Mark Hoad will leave BBA Aviation plc on 30 June and will not be entitled to an LTIP award or a bonus in respect of 2014.

Table 4A – Directors’ shareholding and share interests Includes connected persons Ordinary Ordinary Shares Shares held held at 31 at 1 January Director December 2013 2013 Michael Harper 150,000 170,965 Simon Pryce 991,823 973,282 Mark Hoad 189,183 153,136 Mark Harper n/a 20,000 Wayne Edmunds – – Susan Kilsby – – Nick Land 55,000 55,000 Peter Ratcliffe 15,000 15,000 Sir Nigel Rudd – – Hansel Tookes n/a 30,167

Share Scheme interests (excluding awards made in 2013 that are disclosed in Table 2) 4B – LTIP interests 1 January 31 December Director Description Value of Award 2013 Awarded Vested Lapsed 2013 Simon Pryce 2010 Conditional 303,144 – 205,228 97,916 – 2010 Linked Award 18,356 – 7,460 10,896 – 2011 Conditional 263,200 – – – 263,200 2012 Conditional 414,400 – – – 414,400 Mark Hoad 2010 Conditional 58,144 – 39,363 18,781 – 2010 Linked Award 18,356 – 7,460 10,896 – 2011 Conditional 66,800 – – – 66,800 2012 Conditional 111,400 – – – 111,400

BBA complete.indb 76 12/03/2014 12:45 4C – DBP interests Directors’ Report Directors’ Remuneration Report Performance 1 January Vested during Lapsed during Director Description Measures 2013 the year the year 31 December 2013 Simon Pryce 2010 Conditional Match No 120,045 90,034 30,011 – 2011 Conditional No 112,621 – – 112,621 2011 Conditional Match Yes 112,621 – – 112,621 2011 Voluntary Match Yes 33,982 – – 33,982 2012 Conditional No 133,473 – – 133,473 2012 Conditional Match Yes 133,473 – – 133,473 Mark Hoad 2010 Conditional Match No 15,803 11,852 3,951 – 2011 Conditional No 54,822 – – 54,822 2011 Conditional Match Yes 54,822 – – 54,822 2011 Voluntary Match Yes 22,056 – – 22,056 2012 Conditional No 67,073 – – 67,073 2012 Conditional Match Yes 67,073 – – 67,073

The Conditional awards are as a result of the deferred bonus plan. For directors, half of the bonus earned in any particular year is deferred into an award of conditional shares. In respect of this part of the bonus there are no additional performance conditions other than remaining employed by the Group at the date of vesting. These awards are matched with an award of Conditional Matching shares. There are no Conditional awards shown for 2010 as the shares were purchased and held in trust for the directors and those shares are disclosed in Table 4A.

Table 4D – Share Options Vested and Exercise Awarded exercised Lapsed 31 price in Performance 1 January during the during the during the December pence Exercisable Expiry Description Measures 2013 year year year 2013 per share from date Simon Pryce 2006 Executive Share Yes 18,356 – 12,427 5,929 – 163.43 2013 2013 Option Plan 2004 Savings Related No 27,456 ––– 27,456 57.00 01/05/14 01/11/14 Share Option Plan Mark Hoad BBA Group 2004 Yes – met 40,259 ––– 40,259 298.75 23/05/08 23/05/15 Long-Term Incentive in 2008 Plan 2006 Executive Share Yes 18,356 – 12,427 5,929 – 163.43 2013 2013 Option Plan 2004 Savings Related No 13,728 ––– 13,728 57.00 01/05/14 01/11/14 Share Option Plan 2004 Savings Related No 2,884 ––– 2,884 156.00 01/12/15 01/06/16 Share Option Plan

The options granted under the 2004 plan became exercisable after the third anniversary of the date of grant to the extent that the performance conditions were satisfied. The awards made in 2013 set out in Table 2 on page 74 are not shown in the table above.

BBA complete.indb 77 12/03/2014 12:45 Directors’ Report Reference tables showing Long Term Incentive Performance Directors’ Remuneration Report Conditions:

2011 DBP 2011 LTIP Average annual ROIC Percentage of shares vesting EPS growth Percentage of shares vesting Below 10% Nil Less than RPI +4% Nil At 10% 25% RPI +4% 33% Between 10% 25% to 100% straight line Between RPI +4% 33% to 100% straight line and 11.5% pro rata and RPI +8% pro rata At or above 11.5% 100% At or above RPI +8% 100%

2012 DBP 2012 LTIP Average annual ROIC Percentage of shares vesting EPS growth Percentage of shares vesting Below 10.5% Nil Less than 6.0% Nil At 10.5% 25% 6.0% 33% Between 10.5% 25% to 100% straight line Between 6.0% 33% to 100% straight line and 12.0% pro rata and 12.0% pro rata At or above 12% 100% At or above 12.0% 100%

2013 LTIP and DBP EPS growth per annum Average annual ROIC Percentage of (50% of each award) (50% of each award) shares vesting Less than 6% pa Below 10.5% Nil At 6% pa At 10.5% 25% Between 6% pa Between 10.5% 25% to 100% straight and 12% pa and 12.0% line pro rata At or above 12% pa At or above 12.0% 100%

Deloitte LLP has audited the following items in the Directors’ Remuneration Report as stipulated in the regulations: — the directors’ single total figure table and associated footnotes on page 73 (Table 1); — the table of scheme interests awarded in 2013 on page 74 (Table 2); — the table of directors’ shareholding and share interests on page 76 (Table 4A); and — the tables of share scheme interests on pages 76 and 77 (Tables 4B, 4C and 4D).

The Directors’ Remuneration Report was approved by the Board on 4 March 2014 and signed on its behalf by:

Susan Kilsby Chairman of the Remuneration Committee

BBA complete.indb 78 12/03/2014 12:45 Directors’ Report Policy Directors’ Remuneration Report

Introduction This section of the report describes BBA Aviation’s remuneration policy for directors. The following key principles govern the design of the Group’s remuneration and reward structures: — Relevance to BBA Aviation, the cyclicality of our businesses and the international markets in which we compete and operate. — Pay for performance, notably the effective execution of the Group strategy and delivery of exceptional, long-term sustainable value for all our shareholders and stakeholders. — Reward actions that support our vision, mission and values. — Remuneration should be commensurate with role and responsibilities and sufficient to attract, retain and motivate high calibre individuals with relevant experience. — Reward should be appropriate and easily understood, both internally and externally. — For executive directors a significant element of remuneration should be aligned to long-term business performance. — The reward structure is compatible with our risk policies and systems and must not create environmental, social or governance risks by inadvertently motivating irresponsible behaviour. The remuneration policy will take effect, subject to shareholder approval, from the close of the Company’s AGM in May 2014. All contractual commitments or awards made which are consistent with the remuneration policy in force at the time that the commitment or award was made will be honoured even if they would not otherwise be consistent with the policy prevailing when the commitment is fulfilled or awards vest. Any contractual commitments entered into or awards made before the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 came into force or before a person became a director will also be honoured. The tables below set out a clear and comprehensive summary of BBA Aviation’s remuneration policy for directors and how it operates.

Policy Table Provisions for recovery of sums paid or Strategic purpose Operation Maximum opportunity Link to performance withholding of sums Executive directors Base salary Designed to attract Reviewed annually The annual percentage Salary increases are No individuals with the taking into account salary increase will not linked to individual skills and capabilities market conditions, normally exceed contribution and to oversee the business increases for business performance execution of the performance, employees across the which is assessed Group’s strategy. personal contribution Group as a whole with annually by the and the level of pay comparable levels of Remuneration Set to reflect the role, awards and performance, except Committee. the international conditions elsewhere in certain exceptional nature of operations in the Group. circumstances such as: and the contribution, skills and experience Market comparisons — increase in scope, of the individual. are carried out every complexity or three years and are responsibilities made against of the role; organisations of — salary progression comparable size, for a newly complexity, appointed director; geographic spread, and business focus and — market opportunity. adjustment. Pension Provides the Participation in a Up to 25% of base n/a No opportunity for defined contribution salary per year as a longer-term savings pension plan or a cash cash payment or opportunity to allowance in lieu of employer contribution prepare for this or a combination into the pension retirement, tax of the two. scheme. efficiently where possible to ensure arrangements are locally competitive.

BBA complete.indb 79 12/03/2014 12:45 Directors’ Report Provisions for recovery Directors’ Remuneration Report of sums paid or Strategic purpose Operation Maximum opportunity Link to performance withholding of sums Other Provided to ensure Benefits include but Benefits are set by n/a No benefits arrangements are are not limited to a the Remuneration locally competitive, company car or Committee to be are consistent with allowance, private locally competitive, arrangements medical insurance, and consistent with provided to other health and welfare arrangements senior employees and benefits, life provided to other enhance efficiency insurance, death senior employees. and personal welfare. in service benefit, annual holiday, sick pay, and an annual health check. Relocation benefits may be provided in certain circumstances, see note 4. Annual cash Focuses on targets Bonus is delivered in Maximum annual The level of bonus paid At the and deferred set over a 12 month cash and deferred bonus is 150% of base each year is determined discretion bonus period that are shares. salary with at least by the Remuneration of the aligned to the delivery 40% being deferred Committee after the Remuneration The deferred shares of the Group’s into shares. year end based on Committee, are held for three long-term strategic performance against unvested years over which objectives and targets: deferred share dividends may accrue include: awards may and are released Financial targets will be withheld — Incentive for subject to continuing normally account for or reduced in achievement of employment and not less than 70% of the number in Group financial normally vest over potential maximum the event of objectives; and a three-year period. award; with personal a material — Incentive for objectives accounting The Remuneration financial achievement of for the remainder. Committee will misstatement. individual operate the schemes Examples of financial personal in accordance with performance measures objectives. their respective rules include operating The deferred bonus, and in accordance profit and Group free paid in shares, ensures with the principles cash flow. long-term alignment of the remuneration Examples of personal with shareholders’ policy. objectives include interests. achievement of: specific strategic goals or KPIs. Currently, at threshold financial performance, executives are entitled to a bonus of no more than 20% of salary in addition to any bonus for personal objectives. At target financial performance, executives are entitled to 45% of salary and maximum performance 105%, and on a straight line basis between these points.

BBA complete.indb 80 12/03/2014 12:45 Provisions for recovery Directors’ Report of sums paid or Directors’ Remuneration Report Strategic purpose Operation Maximum opportunity Link to performance withholding of sums Long-term Focuses executives Awards of shares are Maximum annual Financial performance At the incentive on achievement of made on an annual award is 200% of is measured over discretion plan longer-term strategic basis. salary. three years and the of the objectives and performance measures Remuneration Awards will vest ensures long-term are selected in Committee, at 25% for the alignment with accordance with the unvested share achievement shareholders’ Group’s key long-term awards may of threshold interests. strategic performance be withheld performance rising indicators. or be reduced on a straight-line basis in the event to 100% of the award Performance standards of a material vesting at maximum (threshold and financial performance. maximum) are misstatement. reviewed in advance There is no vesting of each performance below threshold. cycle. The Remuneration Committee will review the minimum vesting level and the weightings of performance metrics and the performance metrics themselves annually and retains the right to amend these weightings, metrics and measures as it thinks appropriate to effectively incentivise directors. In the UK, the Employee Share Option Plan (ESOP) is used to grant options that are linked to the Long Term Incentive Plan to allow directors to take advantage of HMRC approved Share Options at no marginal cost to the Company. All employee To encourage Executive directors Subject to the relevant n/a equity employees to buy may participate in local tax limits. participation shares in the locally approved plans plans Company, tax on the same basis as effectively where all eligible employees. possible.

Notes 1 The performance measures selected for the purposes of the annual bonus plan and the Long-Term Incentive Plans are either Key Performance Indicators for the Group or are selected in order to encourage and reward directly or indirectly sustainable and long-term shareholder value creation. Performance targets are set taking into account prior year performance, annual budgets, strategic imperatives, and external factors. ‘Threshold’ performance is set taking into account the highly cyclical nature of our business and the variability of results from year to year and our dependence on flying hours. The ‘maximum’ standard of performance is intended to be exacting and to represent a level of performance that places the Group among the best performers. 81

BBA complete.indb 81 12/03/2014 12:45 Directors’ Report 2 The elements of remuneration for executive directors are similar to those that apply to the management banded population in the Group. Directors’ Remuneration Report Any differences that exist arise either because of market practice and/or the Remuneration Committee’s assessment of business need and commercial necessity. 3 The Company also reimburses business expenses in accordance with the corporate business expenses policy which the Remuneration Committee has discretion to revise from time to time. 4 In addition to other benefits, the Remuneration Committee, where necessary, will provide support in accordance with BBA Aviation’s standard approach to relocation where a director is required to relocate to fulfil their responsibilities. The primary purpose of the policy is to facilitate recruitment and relocation of key employees by protecting the individual and their family from costs arising directly from a move of residence, required for business reasons. The elements of the policy include, but are not limited to, travel reimbursement of the cost of movement of household goods, housing, schooling and other reasonable costs.

Policy Table Chairman Provisions for recovery of sums paid or withholding Strategic purpose Operation Maximum opportunity Link to performance of sums Chairman Fees Designed to attract and The Chairman is paid an £250,000 The review takes No retain a high-calibre annual fee, paid in cash, account of level chairman by offering a which is set by the of experience, market competitive fee. Remuneration Committee time and reviewed on an annual commitment basis. Note that a review and relevant does not automatically market give rise to an increase comparisons in fees. reflecting the size and Notwithstanding the complexity of principle of annual review the Company. described above, the fee for Sir Nigel Rudd is fixed for the first three years of appointment with the first review due in December 2017. Benefits To support the effective Benefits may include, Benefits are set by the n/a No performance of his duties. but are not limited to, Remuneration Committee to contribution to the costs be locally competitive and of a car and a driver. appropriate for the role and will not exceed 30% of fees.

BBA complete.indb 82 12/03/2014 12:45 Policy Table Directors’ Report Directors’ Remuneration Report Non-executive directors Provisions for recovery of sums paid or withholding Strategic purpose Operation Maximum opportunity Link to performance of sums Non-executive directors Fees Designed to attract and The non-executive The annual percentage fee The fee review No retain high-calibre directors are paid an increase will not normally takes account non-executive directors annual basic fee and exceed increases for employees of level of by offering market supplements are paid for across the Group as a whole experience, time competitive fees. additional responsibilities. with comparable levels of commitment The Chairmen of the performance except in certain and relevant Audit and Remuneration exceptional circumstances market Committees receive an such as: comparisons additional fee for chairing reflecting the — increase in scope, the Committee. The Senior size and complexity or Independent Director complexity of responsibilities of the role; receives an additional fee. the Company. and Non-executive director — market adjustment. fees and supplements are The fees set in December 2013 reviewed periodically were fixed for three years, after with comparisons made which they will be reviewed. against similar roles in organisations of comparable size, complexity, geographic spread, business focus and opportunity. The next review is expected to be in December 2016. Fees are paid in cash. Benefits To support the effective None are currently given. Benefits are not variable and No performance of duties. re set by the Remuneration Committee to be locally competitive and appropriate for the role.

Notes 1 The Company also reimburses business expenses in accordance with the corporate business expenses policy which the Remuneration Committee has discretion to revise from time to time.

BBA complete.indb 83 12/03/2014 12:45 Directors’ Report Legacy Arrangements under Incentive Plans Directors’ Remuneration Report There are outstanding awards which apply to directors made under arrangements which will not be offered under the policy effective from the close of the Company’s 2014 AGM. The awards already made under these plans will be honoured.

Provisions for recovery of sums paid or withholding Purpose Operation Maximum opportunity Link to performance of sums Executive directors Deferred Matching The purpose The deferred element of the The maximum Performance is Unvested Bonus Plan was to align annual bonus was subject match under each assessed over a awards may executives’ to a 1:1 match of further of the compulsory three-year period be withheld The final awards under interests with conditional shares that were and voluntary against pre- or reduced in the Plan were made shareholders’ subject to performance elements was determined circumstances in May 2013 in respect interests and conditions set out on 50% of the financial; of material of 2012 performance. Company page 78. annual bonus. performance financial performance. goals/metrics: misstatement. The deferred shares normally vest over three years and 25% of the matching are potentially subject to shares vest forfeiture in accordance at threshold with the scheme rules if performance: the director leaves before 100% for maximum vesting. performance and on a straight line basis The final awards made in in between. 2013 will either vest or lapse in 2016. Share Option Plans Mark Hoad has 40,259 share options at a price of 298.75p. These options were granted under the BBA 2004 Long-Term Incentive Plan. The Options were granted in 2005 and were subject to performance conditions that were satisfied in 2008. This award was made before Mark Hoad became a director on 29 April 2010.

BBA complete.indb 84 12/03/2014 12:45 Levels of remuneration under the policy assuming different performance outcomes for 2014 Directors’ Report Directors’ Remuneration Report For ‘mid-point’ performance the chart below shows that: — more than half of remuneration is performance related; and — more than one third is linked to longer-term performance. For maximum performance the chart below shows that: — over 70% is performance related; and — over 40% is linked to longer-term performance. Half the annual bonus is deferred for three years and is subject to forfeiture.

Simon Pryce 28% 29% 43% Maximum £2,584,781 44% 22% 34% Mid-point £1,656,516 100% Minimum £728,250

Mark Hoad 100% Maximum £204,000 100% Mid-point £204,000 100% Minimum £204,000

£0 | £500,000 | £1,000,000 | £1,500,000 | £2,000,000 | £2,500,000 | £3,000,000 |

Fixed pay Annual bonus Long-term incentives

As noted in the Chairman’s statement Mark Hoad will leave BBA Aviation plc on 30 June and will not be entitled to an LTIP award or a bonus in respect of 2014. He will only receive his salary for half of the year and this is reflected in the graph above. This excludes any possible payments for loss of office. For the purposes of this analysis the following assumptions have been made: — Fixed elements comprise base salary and other benefits; — Base Salary and benefits and pension reflect current levels: — For the Group Chief Executive: base salary of £589,375, benefits of £21,000 and pension of £117,875; — For the Group Finance Director: base salary of £325,000, benefits of £18,000 and pension of £65,000; — For mid-point performance, an assumption of 50% of annual bonus is applied and 50% vesting for the LTIP has also been used. — No share price increase has been assumed.

Recruitment and Appointment Policy This recruitment and appointment policy will apply if any of the following are appointed to the Board: — External candidate; — Internal candidate; — A non-executive director being appointed as Chairman or to an executive role; or — An executive director being promoted. All of the components in the existing policy would be considered in developing an appropriate remuneration package in accordance with the principles set out on page 79 and taking into account the following additional considerations: — A full range of factors including, but not limited to, the calibre of candidate, the level of existing remuneration, the jurisdiction the candidate is recruited from and into, and the individual’s skills and experience. — Internal relativities and appropriate market comparisons. — Any awards or payments made in consideration for remuneration that may be foregone by an external candidate will generally be share-based and subject to forfeiture if the executive leaves within a set period after the appointment. — The value assigned to any remuneration that may be foregone will take into account factors such as the vesting period and the probability of shares vesting and will be based on objective valuation methodologies. As far as possible, the remuneration of new directors will be set in accordance with the existing directors’ remuneration policy, however, the Committee retains discretion to: — use the current Listing Rule 9.4.2R if required in order to facilitate, in unusual circumstances, the recruitment of a director but any arrangements of this kind will not exceed 400% of salary; and — agree contract terms to reflect local market norms but will generally seek to apply the current policy in respect of contracts of employment and corporate governance guidelines.

BBA complete.indb 85 12/03/2014 12:45 Directors’ Report Service contracts Directors’ Remuneration Report The executive directors have contracts of employment which entitle them to 12 months’ notice from the Company in the event of termination other than for cause. Executive Directors’ contracts allow for termination with contractual notice from the Company or termination with a payment in lieu of notice, or an enforced period of paid garden leave at the Company’s discretion. The Group Chief Executive is required to give the Company twelve months’ notice and the Group Finance Director, six months. The Chairman and the non-executive directors each have a letter of appointment. The Chairman’s appointment letter entitles him to six months’ notice from the Company and he is required to give the Company six months’ notice. The Company may terminate the Chairman’s contract immediately and pay him an amount in lieu of his fees for six months less statutory deductions. Letters of appointment and service contracts are available for inspection by shareholders at each AGM and during normal business hours at the Company’s registered office. There are no contractual commitments over and above those disclosed in this Policy.

Table showing unexpired term on service contracts and letters of appointment:

Date of appointment/re-appointment Unexpired term as at 4 March 2014 Simon Pryce 11 June 2007 n/a Mark Hoad 29 April 2010 n/a Michael Harper 1 July 2013 28 months Sir Nigel Rudd 1 December 2013 33 months Nick Land 1 August 2012 17 months Susan Kilsby 10 April 2012 13 months Wayne Edmunds 7 August 2013 28 months Peter Ratcliffe 9 January 2012 10 months

Policy on payment for loss of office In the event of termination of an executive director’s contract the Company will comply with any applicable legislative or regulatory framework and will honour contractual commitments that have been made. The Company will seek to avoid making any payment for failure. The Company takes into account the circumstances of termination and seeks to strike an appropriate balance, considering all relevant matters, that it believes are in the best interests of shareholders. In certain circumstances the executive directors may receive compensation on early termination of a contract which could amount to up to one year’s base salary, benefits in kind and pension rights. The contracts allow for phased payments to be made on termination and include an obligation on the former director to mitigate loss. This mechanism of phased payments allows for the amount of any phased payments to be reduced in circumstances where the former director secures a position during the period of phased payments. A director who leaves as a result of poor personal performance will normally be treated differently than a director who leaves by reason of redundancy, retirement or ill health. The Company will not make any payments for loss of office in the event of gross misconduct. The Remuneration Committee will operate the share schemes in accordance with their respective rules and in accordance with the principles of the remuneration policy (see table on page 87 for further details). The Remuneration Committee reserves the right to reach agreement with departing directors and approve additional payments in connection with the termination of a director’s office or employment where such payment is in the interests of shareholders (including the settlement or compromise of any claim or threatened claim). There is no contractual obligation to pay bonus which has not been superseded by the bonus rules and there is no entitlement to any bonus payments if an employee is under notice given or received at the end of the applicable financial year, although it is within the discretion of the Committee to award bonus, subject to the limits set out in the policy. On termination, a non-executive director would normally receive his fee for the month of termination. The Chairman is entitled to six months’ notice and benefits for that period if served notice by the Company. The Company may purchase a small token leaving gift for departing directors.

BBA complete.indb 86 12/03/2014 12:45 The table below sets out how each component of the payment may be calculated. Directors’ Report Directors’ Remuneration Report Element of payment Basis of calculation Annual base salary Calculated on a contractual basis. Pension and other Calculated on a contractual basis and where the pay in lieu of notice clause is invoked, an amount benefits up to one year’s accrued benefits. The Committee also make modest payments relating to outplacements. Annual incentive No bonus is paid in the case of dismissal for gross misconduct. Ordinarily individuals are only entitled to bonus when reasons for leaving are including, and not limited to, retirement, death, ill health, redundancy, or sale of an employing entity. However the Remuneration Committee may exercise its discretion to pay bonus depending on the exact circumstances of the termination. Bonus is not included in the calculation of any payment in lieu of notice. Bonus is calculated in accordance with the rules of the plan. Long-term incentives On a contractual basis and in accordance with the scheme rules. Unvested shares lapse under the Long Term Incentive Plan on termination unless it is for a permitted reason (ill health, redundancy, etc.) or the Remuneration Committee makes use of the discretion under the rules of the plans to allow the shares to vest. Any vesting is subject to the substitution of performance targets and, unless the Remuneration Committee determines otherwise, through pro-rating to reflect the date of termination, relative to the performance periods of the outstanding shares. Deferred shares under the annual bonus plan may or may not be forfeitable depending on the timing of the termination in the deferral periods. In the case of the unvested Deferred Bonus Matching shares the award may be awarded on termination for a permitted reason (e.g. ill health, redundancy etc) or at the discretion of the Remuneration Committee. Any matching award will vest subject to performance conditions and, unless the Committee determines otherwise pro-rated for the period served as a director during the performance period at the discretion of the Remuneration Committee. The contracts of the Group Chief Executive and the Finance Director preclude any right to other compensation for any loss of any share-based pay beyond the rules of the schemes. Compensation for Upon termination, any ‘buy out’ awards would normally lapse. However, the Remuneration Committee forfeited remuneration does retain the discretion to decide otherwise, provided the termination is not as a result of poor performance. Other benefits, e.g. Will depend on what has been agreed on appointment, but the Remuneration Committee would not relocation allowances, expect any or all of these elements of pay to form part of any termination arrangement but has discretion international mobility to make payments in respect of them. benefits and expenses All employee equity Directors will be treated in the same manner as any other member of staff in respect of those plans. participation plans

BBA complete.indb 87 12/03/2014 12:45 Directors’ Report Change of Control Directors’ Remuneration Report In the event of a change of control the Remuneration Committee will determine the extent to which any shares will vest taking into account all relevant factors including the performance criteria and the time elapsed since the date of grant. Directors will be entitled to receive their conditional shares from the deferred bonus where the risk of forfeiture has lifted.

Employment Conditions Elsewhere in the Company In determining remuneration, the Remuneration Committee is mindful of pay and conditions across the Group. Decisions concerning Executive Directors’ pay and benefits are generally in line with the practices and framework across the Group. The Committee is briefed by the Group Chief Executive and Group HR Director on the overall pay and benefits framework for the Group and on changes made. The Remuneration Committee uses external remuneration comparison measurements.

Employees’ Views Employees have not been consulted on the directors’ remuneration policy but are free to ask any questions they wish and to offer any opinions they have through our employee communications channels. Employees who are also shareholders are able to vote on the Directors’ Remuneration Policy and Report.

Shareholders’ Views The Remuneration Committee supported by the Group HR Director actively engages with major institutional shareholders on a regular basis. Recent consultations have highlighted the preference of many shareholders for greater simplicity and streamlining of executive directors’ pay and the evolution of BBA Aviation’s policy reflects both the needs of the business and, as far as possible, the views of all our largest shareholders.

BBA complete.indb 88 12/03/2014 12:45 The directors have carried out a critical review of the Group’s Directors’ Report Going Concern Going Concern 2014 budget and medium-term plans, with due regard for the risks and uncertainties to which the Group is exposed and the impact that these could have The Group’s business activities together with the factors likely on trading performance. The key assumptions used in to affect its future development, performance and position are constructing the budget were that: set out in the Strategic Report on pages 1 to 92. The financial — Signature and ASIG will see gradual recovery throughout position of the Group, its cash flows and liquidity position the plan period through modest market growth; are described on pages 56 and 57. In addition, note 17 of — Engine Repair and Overhaul will continue to progress through the Consolidated Financial Statements includes the Group’s operational improvement; and objectives, policies and processes for managing its capital; — Legacy Support’s platform specific demand will be enhanced its financial risk management objectives; details of its financial through new licences signed. instruments and hedging activities; and its exposure to credit risk and liquidity risk. The Directors have a reasonable expectation that the Company The Group’s committed borrowing facilities are a and the Group have adequate resources to continue in $750 million multicurrency revolving credit facility, dated operational existence for the foreseeable future. Thus they 21 April 2011, with a split maturity of $250 million which is due continue to adopt the going concern basis of accounting in to expire in April 2014, and $500 million which is due to expire in preparing the annual financial statements. April 2016, and $300 million in senior loan notes in the US private placement market with maturities of seven, ten and twelve years. Under the $750 million multicurrency revolving credit facility, as at 31 December 2013, the Group had available $432 million of undrawn committed borrowing facilities. These debt obligations and facilities are subject to cross default. Further details relating to these debt arrangements are provided in note 16 to the Consolidated Financial Statements. The bank facility and the US private placement notes are subject to two main financial covenants: maximum net debt to underlying EBITDA of 3.5 times and minimum net interest cover of 3.0 times underlying EBITDA. The Directors expect the Group to comply with these covenants for the foreseeable future. The Group’s forecasts and projections taking account of reasonably possible changes in trading performance show that the Group should be able to operate within the level of its current facilities in the foreseeable future. The principal risks and uncertainties affecting the forecasts and projections, to which the Group is exposed, relate to the number of hours of flying activity, principally in B&GA, but also to a lesser extent in commercial and military aviation. Flying hours largely dictate the drivers of revenue, namely fuel volumes in Signature, aircraft movements in ASIG, engine overhaul cycles in ERO and demand for components in Legacy Support and APPH. Further details of these risks and uncertainties are provided on page 21.

BBA complete.indb 89 12/03/2014 12:45 Directors’ Report Directors’ Interests in Shares Additional Disclosures Additional Disclosures Directors’ interests in shares and share options are contained in the Directors’ Remuneration Report.

Group Results and Dividends Directors’ Indemnities The results for the year ended 31 December 2013 are shown The Company has entered into deeds of indemnity in favour in the Consolidated Income Statement on page 96. of each of its directors under which the Company agrees The directors recommend the payment of a final ordinary to indemnify each director against liabilities incurred by that share dividend for 2013 of 11.0¢ net per share on 23 May 2014 to director in respect of acts or omissions arising in the course of shareholders on the register at the close of business on 11 April their office or otherwise by virtue of their office. In addition, the 2014, which together with the interim dividend paid on Company has entered into indemnity deed polls in substantially 1 November 2013 makes a total of 15.40¢ net per ordinary share similar terms in favour of members of the Executive for the year (2012: 14.65¢). Shareholders will receive their dividends Management Committee and other members of senior in sterling unless they have previously elected to receive their management. Where such deeds are for the benefit of directors dividends in US dollars. Shareholders who wish to receive they are qualifying third party indemnity provisions as defined by dividends in US dollars must make the appropriate election to s309B of the Companies Act 1985 or s234 of the Companies Act Capita Registrars no later than 5.30pm Wednesday 30 April 2014. 2006, as applicable. At the date of this report, these indemnities A new election is not required if shareholders have previously are therefore in force for the benefit of all the current directors made a valid election to receive dividends in US dollars. Further of the Company and other members of senior management. information concerning the dividend currency election can be On 1 November 2007, a subsidiary of the Company, BBA found on the Company’s website at www bbaaviation.com. Aviation Finance, entered into qualifying third party indemnity provisions as defined by s234 of the Companies Act 2006 in Acquisitions and Disposals favour of its directors, under which each director is indemnified Acquisitions and disposals in the year are described on page 56 against liabilities incurred by that director in respect of acts or and in note 24. omissions arising in the course of their office or otherwise by virtue of their office and such provisions remain in force as at Events After the Balance Sheet Date the date of this Report. In February 2014, the Group completed the disposal of APPH to Héroux-Devtek Inc for a total cash consideration of $128 Employee Information million. As a result of the disposal of APPH, ordinarily a section 75 The Company provides employees with various opportunities debt would have been triggered. The Group has agreed with the to obtain information on matters of concern to them and to Trustees of the BBA Income and Protection Plan to apportion the improve their awareness of the financial and economic factors section 75 debt and put in place an asset backed funding that affect the performance of the Company. These include structure which will replace the previously agreed schedule of “all hands briefings”, staff forums and meetings with trade deficit contributions as set out in note 19. unions that take place throughout the year. In 2013, a number of communication initiatives have been developed to foster Research and Development effective two-way communication around the organisation. The Group continues to devote effort and resources to research All companies within the Group strive to operate fairly at and development of new processes and products. Costs of all times and this includes not permitting discrimination against $4.4 million have been charged to the income statement any employee or applicant for employment on the basis of race, during the year. religion or belief, colour, gender, disability, national origin, age, military service, veteran status, sexual orientation or marital Market Value of Land and Buildings status. This includes giving full and fair consideration to suitable The directors are of the opinion that the market values of the applications for employment from disabled persons and making Group’s properties are not substantially different from the values appropriate accommodations so that if existing employees included in the Group’s Consolidated Financial Statements. become disabled they can continue to be employed, wherever practicable, in the same job or, if this is not practicable, making Board of Directors every effort to find suitable alternative employment and to The current directors of the Company at the date of this report provide relevant training. appear on pages 8 and 9. Mark Harper retired from the Board on 10 May 2013 and Hansel Tookes resigned from the Board Agreements on 30 September 2013. Wayne Edmunds was appointed to Under s992 of the Companies Act 2006 the Company discloses the Board on 7 August 2013 and Sir Nigel Rudd was appointed that in the event of a change of control in the Company: (i) the to the Board on 1 December 2013. All the other directors held Company’s $750 million revolving credit facility dated 21 April office throughout the financial year under review. 2011 and its $300 million private note placement dated May 2011 In October 2013, the Company announced that could become repayable; and the Engine Lease Agreement immediately following the 2014 Annual General Meeting, dated 29 June 2009 (as amended) under which $62 million of Michael Harper would retire from the Board as Chairman and aircraft engines have been leased to the ERO business could be that Sir Nigel Rudd would be appointed as Chairman in his place. terminated; (ii) certain authorisations issued to the ERO business

BBA complete.indb 90 12/03/2014 12:45 to carry out certain works on the authorising OEM’s engines Resolutions at the Annual General Meeting Directors’ Report Additional Disclosures could become terminable by the relevant OEM (OEMs include The Company’s AGM will be held on 7 May 2014. Accompanying Rolls-Royce, Pratt & Whitney Canada and Honeywell); (iii) certain this Report is the Notice of AGM which sets out the resolutions to authorisations issued to the Legacy Support business by United be considered and approved at the meeting together with some Technologies Corporation companies could become terminable; explanatory notes. The resolutions cover such routine matters and (iv) the operating licence with London Luton Airport as the renewal of authority to allot shares (referred to earlier), Operations may be terminable. Under s992 of the Companies Act to disapply pre-emption rights and to purchase own shares. 2006 the Company also discloses an employment agreement between a subsidiary company and Keith Ryan entered into in Substantial Shareholdings July 2002 which has provisions such that in certain circumstances The Company has been notified, as at 4 March 2014, of the relating to a change of control of the Company he could receive following material interests in the voting rights of the Company compensation upon termination of employment of up to a year’s under the provisions of the Disclosure and Transparency Rules: remuneration, based on base salary, bonus, benefits in kind and pension rights during the notice period. % Tiger Global Investments, L.P. 11.14 Management Report Aviva plc and its subsidiaries 8.63 The management report required by the provisions of the Prudential plc group of companies 6.39 Disclosure and Transparency Rules is included within the Strategic Report and has been prepared in consultation with William H. Gates III 6.09 management. Harris Associates L.P. 4.96 Standard Life Investments Ltd 4.84 Suppliers’ Payment Policy Newton Investment Management Limited 4.98 The Company and Group’s policy is to settle terms of payment Black Rock, Inc. 4.97 with suppliers when agreeing the terms of each transaction, to Jupiter Asset Management Limited 4.39 ensure that suppliers are made aware of the terms of payment Barclays Global Investors 3.86 and to abide by the terms of the payment. Royal London Asset Management 3.03 Share Capital Details of the Company’s share capital and changes to the share Charitable and Political Donations capital are shown in note 21 to the Consolidated Financial Group donations to charities worldwide were $440,000 Statements. That note also contains a summary of the rights (2012: $575,000). No donations were made to any political attaching to each class of shares and details of the number of party in either year. ordinary shares held in employee benefit trusts. Awards granted under the Company’s share plans are satisfied either by shares Auditor held in the employee benefit trusts or by the issue of new shares As required by s418 of the Companies Act 2006, each of the when awards vest. The Remuneration Committee monitors the directors, at the date of the approval of this report, confirms that: number of awards made under the various share plans and their a) so far as the director is aware, there is no relevant audit potential impact on the relevant dilution limits recommended information of which the Company’s auditor is unaware; by the Association of British Insurers. Based on the Company’s and issued share capital as at 31 December 2013, these were (in b) the director has taken all the steps that he ought to have respect of the limit of 10% in any rolling 10-year period for all taken as a director to make himself aware of any relevant share plans) 4.1% and (in respect of the limit of 5% in any rolling audit information and to establish that the Company’s 10-year period for discretionary share plans) 2.8%. auditor is aware of that information. The Company was given authority to purchase up to Words and phrases used in this confirmation should be 14.99% of its existing ordinary share capital at the 2013 Annual interpreted in accordance with s418 of the Companies Act 2006. General Meeting (AGM). That authority will expire at the conclusion of the AGM in 2014 unless renewed. Accordingly, A resolution to reappoint Deloitte LLP as auditor of the Company a special resolution to renew the authority will be proposed will be proposed at the AGM. at the forthcoming AGM. The existing authority for directors to allot ordinary shares Directors’ Report approved by the Board on 4 March 2014 and will expire at the conclusion of the 2014 AGM. Accordingly, an signed on its behalf by: ordinary resolution to renew this authority will be proposed at the forthcoming AGM. In addition, it will be proposed to give the directors further authority to allot ordinary shares in connection Iain Simm with a rights issue in favour of ordinary shareholders. This is in line Group General Counsel and Company Secretary with guidance issued by the Association of British Insurers. If the directors were to use such further authority in the year following the 2014 AGM, all directors wishing to remain in office would stand for re-election at the 2015 AGM. Details of these resolutions are included with the Notice of AGM enclosed with this Report. 91

6758_BBA_AR PART 3 front p69-91.indd 91 14/03/2014 18:18 Statement of Directors’ Responsibilities Statement of Directors’ Responsibilities The directors are responsible for keeping adequate accounting The directors are responsible for preparing the Annual Report records that are sufficient to show and explain the Company’s and the financial statements in accordance with applicable transactions and disclose with reasonable accuracy at any time law and regulations. the financial position of the Company and enable them to ensure Company law requires the directors to prepare financial that the financial statements comply with the Companies Act statements for each financial year. Under that law the directors 2006. They are also responsible for safeguarding the assets of are required to prepare the Group financial statements in the Company and hence for taking reasonable steps for the accordance with International Financial Reporting Standards prevention and detection of fraud and other irregularities. (IFRSs) as adopted by the European Union and Article 4 of the The directors are responsible for the maintenance and IAS Regulation and have elected to prepare the Parent Company integrity of the corporate and financial information included financial statements in accordance with United Kingdom on the Company’s website. Legislation in the United Kingdom Generally Accepted Accounting Practice (United Kingdom governing the preparation and dissemination of financial Accounting Standards and applicable law). Under company statements may differ from legislation in other jurisdictions. law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of Responsibility statement affairs of the Company and of the profit or loss of the Company We confirm that to the best of our knowledge: for that period. — the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair In preparing the Parent Company financial statements, view of the assets, liabilities, financial position and profit or the directors are required to: loss of the Company and the undertakings included in the — select suitable accounting policies and then apply them consolidation taken as a whole; consistently; — the strategic report includes a fair review of the development — make judgements and accounting estimates that are and performance of the business and the position of the reasonable and prudent; Company and the undertakings included in the consolidation — state whether applicable UK Accounting Standards have taken as a whole, together with a description of the principal been followed, subject to any material departures disclosed risks and uncertainties that they face; and and explained in the financial statements; and — the annual report and financial statements, taken as a — prepare the financial statements on the going concern basis whole, are fair, balanced and understandable and provide unless it is inappropriate to presume that the Company will the information necessary for shareholders to assess the continue in business. performance, business model and strategy of the Company.

In preparing the Group financial statements, IAS 1: Presentation By Order of the Board of Financial Statements requires that directors: — properly select and apply accounting policies; — present information, including accounting policies, in a Simon Pryce Mark Hoad manner that provides relevant, reliable, comparable and Group Chief Executive Group Financial Director understandable information; 4 March 2014 4 March 2014 — provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and — make an assessment of the Company’s ability to continue as a going concern.

BBA complete.indb 92 12/03/2014 12:45 Independent Auditor’s Report Our assessment of risks of material misstatement Independent Auditor’s Report to the members of BBA Aviation plc The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, Opinion on financial statements of BBA Aviation plc the allocation of resources in the audit and directing the efforts In our opinion: of the engagement team: — the financial statements give a true and fair view of the — The carrying value of inventory across the Aftermarket state of the Group’s and of the Parent Company’s affairs as Services businesses, in particular the appropriateness of at 31 December 2013 and of the Group’s profit for the year judgements applied within the inventory provisioning. then ended; Given the nature of the Group’s operations, inventory — the Group financial statements have been properly prepared can be held for long periods of time before utilisation. in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; We tested the provisions held against inventory in the — the Parent Company financial statements have been properly Aftermarket Services businesses by assessing the judgements prepared in accordance with United Kingdom Generally regarding the expected levels of surplus and obsolete stock Accepted Accounting Practice; and held. Key to these judgements are the estimated remaining — the financial statements have been prepared in accordance lives of the engine platforms, the estimated frequency of with the requirements of the Companies Act 2006 and, engine overhauls, the expected future usage of inventory as regards the Group financial statements, Article 4 of the based on past experience and the level of write-offs in IAS Regulation. previous years. We also considered the amendment to the provisioning policy which is designed to achieve greater The financial statements comprise: the Consolidated Income consistency across the different Aftermarket Services Statement, the Consolidated Statement of Comprehensive businesses and validated the revised approach. Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in — Revenue recognition in the Aftermarket Services businesses. Equity, the related notes 1 to 28 and the Group Accounting There is judgement associated with the revenue recorded Policies. This also comprises the Parent Company Balance Sheet on a percentage of completion basis at the year-end for and the related notes 1 to 13 and the Parent Company engine overhauls. There is also judgement associated with Accounting Policies. The financial reporting framework that has the revenue recognised and operating lease classification been applied in the preparation of the Group financial statements on the sale of certain engines which are subject to is applicable law and IFRSs as adopted by the European Union. leaseback arrangements. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is We assessed the judgements applied on revenue recognised applicable law and United Kingdom Accounting Standards on a percentage of completion basis by verifying time and (United Kingdom Generally Accepted Accounting Practice). cost records and the nature of the contractual arrangements where engines have been sold and are then subject to Separate opinion in relation to IFRSs as issued by the IASB leaseback arrangements. In assessing the lease classification As explained in the Accounting Policies to the Group financial in the sale and leaseback arrangements, we also reviewed statements, in addition to complying with its legal obligation the terms of the leases and third party valuation reports to apply IFRSs as adopted by the European Union, the Group to confirm the balance of risks and rewards between the has also applied IFRSs as issued by the International Accounting lessor and the lessee. Standards Board (IASB). In our opinion the Group financial statements comply — The measurement of taxation assets and liabilities, with IFRSs as issued by the IASB. in particular the judgements that support the income tax provision and recognition of deferred tax assets. Going concern As required by the Listing Rules we have reviewed the directors’ We considered the appropriateness of management’s statement contained within the Directors’ Report on page 89 judgement in relation to the level of corporate income tax that the Group is a going concern. provisions held through the use of our tax specialists and We confirm that: review of third party evidence, including the status of — we have concluded that the directors’ use of the going discussions and communications with the relevant tax concern basis of accounting in the preparation of the financial authorities. In addition, we assessed the appropriateness of statements is appropriate; and management’s assumptions and estimates in relation to — we have not identified any material uncertainties that may generating future taxable profits to support the recognition cast significant doubt on the Group’s ability to continue as of deferred tax assets. a going concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.

BBA complete.indb 93 12/03/2014 12:45 Independent Auditor’s Report The Audit and Risk Committee’s consideration of these risks is set For the remaining location, which was subject to specific audit out on page 65. procedures, the extent of our audit work was based on Our audit procedures relating to these matters were our assessment of the risks of material misstatement and of the designed in the context of our audit of the financial statements materiality of the Group’s business operation at that location. as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not Opinions on other matters prescribed by the Companies modified with respect to any of the risks described above, and Act 2006 we do not express an opinion on these individual matters. In our opinion: — the information given in the Strategic Report and the Our application of materiality Directors’ Report for the financial year for which the financial We define materiality as the magnitude of misstatement in the statements are prepared is consistent with the financial financial statements that makes it probable that the economic statements; and decisions of a reasonably knowledgeable person would be — the part of the Directors’ Remuneration Report to be audited changed or influenced. We use materiality both in planning the has been properly prepared in accordance with the scope of our audit work and in evaluating the results of our work. Companies Act 2006. We determined materiality for the Group to be $8.3 million. This equates to approximately 5% of underlying profit before tax Matters on which we are required to report by exception and less than 0.5% of total assets. Underlying profit before tax is normalised for the materiality calculation to exclude exceptional Adequacy of explanations received and accounting records items because these are audited separately and would, Under the Companies Act 2006 we are required to report to you if included, significantly distort the materiality calculation if, in our opinion: year on year. — we have not received all the information and explanations We agreed with the Audit and Risk Committee that we we require for our audit; or would report to them all audit differences in excess of $165,000, — adequate accounting records have not been kept by the as well as differences below that threshold that, in our view, Parent Company, or returns adequate for our audit have warranted reporting on qualitative grounds. We also report not been received from branches not visited by us; or to the Audit and Risk Committee on disclosure matters that — the Parent Company financial statements are not in we identified when assessing the overall presentation of the agreement with the accounting records and returns. financial statements. We have nothing to report in respect of these matters. An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding Directors’ remuneration of the Group and its environment, including group-wide Under the Companies Act 2006 we are also required to report controls, and assessing the risks of material misstatement at the if in our opinion certain disclosures of directors’ remuneration group level. Based on that assessment, we focused our Group have not been made or the part of the Directors’ Remuneration audit scope on 12 operating locations, of which seven were Report to be audited is not in agreement with the accounting subsidiaries subject to a full scope audit for the year ended records and returns. We have nothing to report arising from 31 December 2013 in accordance with statutory reporting these matters. requirements in the UK and Europe. Two were subject to specific audit procedures, focused on the audit risk areas. The remaining Corporate Governance Statement three operating locations were the Group’s US businesses Under the Listing Rules we are also required to review the for which full scope audits were completed. These locations part of the Corporate Governance Statement relating to the represent the principal operating locations of the Group Company’s compliance with nine provisions of the UK Corporate and account for 97% of the Group’s revenue and 85% of Governance Code. We have nothing to report arising from the Group’s total assets. our review. Audits of these locations are performed at a materiality level determined by reference to a proportion of Group Our duty to read other information in the annual report materiality appropriate to the relative scale of the business Under International Standards on Auditing (UK and Ireland), concerned. we are required to report to you if, in our opinion, information The Group audit team continue to be involved in the audit in the annual report is: work completed in relation to the Group’s principal operating — materially inconsistent with the information in the audited locations, including following a programme of planned visits that financial statements; or has been designed so that a senior member of the Group audit — apparently materially incorrect based on, or materially team visits each of the ten operating locations that have been inconsistent with, our knowledge of the Group acquired assessed as the most financially significant to the Group on an in the course of performing our audit; or annual basis. — otherwise misleading. For each of the businesses included within the programme of planned visits, the Group audit team discusses audit findings with the relevant component audit team throughout the audit engagement and reviews relevant audit working papers.

BBA complete.indb 94 12/03/2014 12:45 In particular, we are required to consider whether we have Independent Auditor’s Report identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the Audit and Risk Committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor As explained more fully in the Statement of Directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Edward Hanson (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London United Kingdom

4 March 2014

BBA complete.indb 95 12/03/2014 12:45 Consolidated Financial Statements Consolidated Income Statement Consolidated Income Statement

Financial statements 2013 2012 Exceptional Underlying1 Exceptional Total 93 Independent Auditor’s Report to Underlying1 Items Total Restated2 Items Restated2 the members of BBA Aviation plc For the year ended 31 December Notes $m $m $m $m $m $m 96 Consolidated Income Statement Revenue 1 2,218.6 – 2,218.6 2,178.9 – 2,178.9 97 Consolidated Statement of Cost of sales (1,789.2) – (1,789.2) (1,766.5) – (1,766.5) Comprehensive Income Gross profit 429.4 – 429.4 412.4 – 412.4 98 Consolidated Balance Sheet 99 Consolidated Cash Flow Statement Distribution costs (38.0) – (38.0) (38.8) – (38.8) Administrative expenses (194.8) (9.0) (203.8) (185.0) (7.6) (192.6) 100 Consolidated Statement of Changes in Equity Other operating income 2.4 – 2.4 2.8 – 2.8 101 Accounting Policies of the Group Share of profit of associates and joint ventures 10 1.4 – 1.4 1.6 – 1.6 106 Notes to the Consolidated Other operating expenses (0.3) (15.6) (15.9) (0.3) (8.1) (8.4) Financial Statements Restructuring costs – (6.1) (6.1) – (17.0) (17.0) 141 Company Balance Sheet Operating profit 1, 2 200.1 (30.7) 169.4 192.7 (32.7) 160.0 142 Accounting Policies of the Company Investment income 3 4.6 5.4 10.0 5.8 – 5.8 144 Notes to the Company Financial Statements Finance costs 3 (34.2) – (34.2) (40.7) – (40.7) 149 Principal Subsidiary and Profit before tax 170.5 (25.3) 145.2 157.8 (32.7) 125.1 Associated Undertakings 150 Five Year Summary Tax 4 (24.8) 17.7 (7.1) (24.3) 9.5 (14.8) 151 Shareholder Information Profit/(loss) for the year 145.7 (7.6) 138.1 133.5 (23.2) 110.3

Attributable to: Equity holders of BBA Aviation plc 146.1 (7.6) 138.5 133.8 (23.2) 110.6 Non-controlling interest (0.4) – (0.4) (0.3) – (0.3) 145.7 (7.6) 138.1 133.5 (23.2) 110.3

Adjusted Unadjusted Earnings per share Adjusted Unadjusted Restated2 Restated2 Basic 6 30.5¢ 28.9¢ 27.9¢ 23.1¢ Diluted 6 30.1¢ 28.5¢ 27.5¢ 22.7¢

1 Underlying profit is before exceptional items. Exceptional items are items which are material or non-recurring in nature, costs relating to acquisitions and disposals, and the amortisation of acquired intangibles, as set out in note 2 to the Consolidated Financial Statements. 2 IAS 19: Employee Benefits (Revised) (IAS 19R) is effective for financial reporting periods beginning 1 January 2013 with retrospective application required. The results for the year ended 31 December 2012 have been restated for the impact of applying IAS 19R and more detail is set out in the accounting policies to these consolidated financial statements.

BBA complete.indb 96 12/03/2014 12:45 Consolidated Statement of Comprehensive Income Consolidated Financial Statements Consolidated Statement of Comprehensive Income 2013 2012 Restated1 For the year ended 31 December $m $m Profit for the year 138.1 110.3

Other comprehensive income Items that will not be reclassified subsequently to profit or loss Actuarial gains/(losses) on defined benefit pension schemes 26.0 (22.3) Change in pension asset under IFRIC 14 (22.3) 4.5 Tax relating to components of other comprehensive income that will not be reclassified subsequently to profit or loss 3.7 7.0 7.4 (10.8)

Items that may be reclassified subsequently to profit or loss Exchange difference on translation of foreign operations (15.7) (24.6) Gains on net investment hedges 5.7 33.2 Fair value movements in foreign exchange cash flow hedges 3.7 5.1 Transfer to profit or loss from other comprehensive income on foreign exchange cash flow hedges (2.1) (0.8) Fair value movement in interest rate cash flow hedges 2.6 (5.4) Transfer to profit or loss from other comprehensive income on interest rate cash flow hedges 6.1 10.3 Tax relating to components of other comprehensive income that may be reclassified subsequently to profit or loss 0.6 0.8 0.9 18.6

Other comprehensive income for the year 8.3 7.8

Total comprehensive income for the year 146.4 118.1

Attributable to: Equity holders of BBA Aviation plc 146.8 118.4 Non-controlling interests (0.4) (0.3) 146.4 118.1

1 IAS 19: Employee Benefits (Revised) (IAS 19R) is effective for financial reporting periods beginning 1 January 2013 with retrospective application required. The results for the year ended 31 December 2012 have been restated for the impact of applying IAS 19R and more detail is set out in the accounting policies to these consolidated financial statements.

BBA complete.indb 97 12/03/2014 12:45 Consolidated Financial Statements Consolidated Balance Sheet Consolidated Balance Sheet

Financial statements 2013 2012 As at 31 December Notes $m $m 93 Independent Auditor’s Report to the members of BBA Aviation plc Non-current assets 96 Consolidated Income Statement Goodwill 8 837.6 834.7 97 Consolidated Statement of Other intangible assets 8 219.7 174.1 Comprehensive Income Property, plant and equipment 9 557.0 511.5 98 Consolidated Balance Sheet Interests in associates and joint ventures 10 8.1 5.0 99 Consolidated Cash Flow Trade and other receivables 12 21.6 53.7 Statement Deferred tax asset 20 8.6 6.0 100 Consolidated Statement of Changes in Equity 1 1,652.6 1,585.0 101 Accounting Policies of the Group Current assets 106 Notes to the Consolidated Inventories 11 199.7 261.8 Financial Statements Trade and other receivables 12 352.8 377.3 141 Company Balance Sheet Assets classified as held for sale 91.5 – 142 Accounting Policies of Cash and cash equivalents 12 162.1 151.1 the Company Tax recoverable 5.7 11.0 144 Notes to the Company Financial Statements 811.8 801.2 149 Principal Subsidiary and Total assets 1 2,464.4 2,386.2 Associated Undertakings 150 Five Year Summary Current liabilities 151 Shareholder Information Trade and other payables 13 (447.2) (471.1) Tax liabilities (69.6) (96.1) Obligations under finance leases 14 (1.4) (1.5) Borrowings 16 (18.2) (11.2) Provisions 18 (3.2) (3.9) Liabilities associated with assets held for sale (17.9) – (557.5) (583.8) Net current assets 254.3 217.4

Non-current liabilities Borrowings 16 (627.5) (580.6) Other payables due after one year 13 (25.9) (23.5) Retirement benefit obligations 19 (57.6) (66.3) Obligations under finance leases 14 – (1.4) Deferred tax liabilities 20 (87.8) (82.0) Provisions 18 (14.1) (27.2) (812.9) (781.0) Total liabilities 1 (1,370.4) (1,364.8) Net assets 1 1,094.0 1,021.4

Equity Share capital 21 251.8 251.5 Share premium account 21 733.0 732.8 Other reserves 21 6.9 6.9 Treasury reserve 21 (17.1) (5.5) Capital reserve 21 40.6 34.4 Hedging and translation reserves 21 (37.7) (38.0) Retained earnings 21 121.2 43.8 Equity attributable to equity holders of BBA Aviation plc 1,098.7 1,025.9 Non-controlling interest (4.7) (4.5) Total equity 1,094.0 1,021.4

These financial statements were approved by the Board of Directors on 4 March 2014 and signed on its behalf by:

Simon Pryce Mark Hoad Group Chief Executive Group Finance Director 98

BBA complete.indb 98 12/03/2014 12:45 Consolidated Cash Flow Statement Consolidated Financial Statements Consolidated Cash Flow Statement

2013 2012 For the year ended 31 December Notes $m $m Operating activities Net cash flow from operating activities 23 242.7 207.2

Investing activities Interest received 4.1 7.3 Dividends received from associates 1.3 0.8 Purchase of property, plant and equipment (71.0) (51.1) Purchase of intangible assets† (18.8) (5.4) Proceeds from disposal of property, plant and equipment 1.7 0.7 Acquisition of subsidiaries 24 (71.3) (35.1) Investment in joint ventures (3.0) – Net cash outflow from investing activities (157.0) (82.8)

Financing activities Interest paid (25.2) (38.3) Interest element of finance leases paid (0.1) (0.4) Dividends paid (71.3) (67.9) Losses from realised foreign exchange contracts (36.2) (20.8) Proceeds from issue of ordinary shares 0.5 1.8 Purchase of own shares (15.0) (12.4) Increase in loans 68.5 52.5 Decrease in finance leases (1.5) (1.5) Increase/(decrease) in overdrafts 8.5 (12.1) Net cash outflow from financing activities (71.8) (99.1)

Increase in cash and cash equivalents 13.9 25.3 Cash and cash equivalents at beginning of year 151.1 125.1 Exchange adjustments – 0.7 Cash and cash equivalents at end of year†† 12,17 165.0 151.1

Net debt at beginning of year (416.4) (403.6) Increase in cash and cash equivalents 13.9 25.3 Increase in loans (68.5) (52.5) Decrease in finance leases 1.5 1.5 (Increase)/decrease in overdrafts (8.5) 12.1 Exchange adjustments (0.5) 0.8 Net debt at end of year††† (478.5) (416.4)

† Purchase of intangible assets includes $11.8 million (2012: $0.4 million) paid in relation to Ontic licences. †† Cash and cash equivalents includes $2.9 million (2012: $nil) included within assets classified as held for sale (see note 25). ††† Net debt includes $2.9 million (2012: $nil) of cash and cash equivalents and $2.5 million (2012: $nil) of borrowings included within net assets classified as held for sale (see note 25. Within the Group’s definition of net debt the US private placement is included at its face value of $300 million reflecting the fact that the liabilities will be in place until maturity. This is $6.1 million (2012: $27.2 million) lower than its carrying value.

BBA complete.indb 99 12/03/2014 12:45 Consolidated Financial Statements Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity

Financial statements Non- Share Share Retained Other controlling Total 93 Independent Auditor’s Report to capital premium earnings reserves Total Interests equity the members of BBA Aviation plc $m $m $m $m $m $m $m 96 Consolidated Income Statement Balance at 1 January 2012 250.1 732.4 19.8 (18.7) 983.6 (3.9) 979.7 97 Consolidated Statement of Total comprehensive income for the year – – 100.6 17.8 118.4 (0.3) 118.1 Comprehensive Income Dividends – – (67.9) – (67.9) – (67.9) 98 Consolidated Balance Sheet Issue of share capital 1.4 0.4 – – 1.8 – 1.8 99 Consolidated Cash Flow Statement Movement on treasury reserve – – – (12.4) (12.4) – (12.4) 100 Consolidated Statement of Credit to equity for equity-settled share-based payments – – – 0.9 0.9 – 0.9 Changes in Equity Tax on share-based payment transactions – – 1.5 – 1.5 – 1.5 101 Accounting Policies of Changes in non-controlling interests – – – – – (0.3) (0.3) the Group Transfer to retained earnings – – (10.2) 10.2 – – – 106 Notes to the Consolidated Financial Statements Balance at 1 January 2013 251.5 732.8 43.8 (2.2) 1,025.9 (4.5) 1,021.4 Total comprehensive income for the year – – 146.5 0.3 146.8 (0.4) 146.4 141 Company Balance Sheet Dividends – – (71.3) – (71.3) – (71.3) 142 Accounting Policies of the Company Issue of share capital 0.3 0.2 – – 0.5 – 0.5 144 Notes to the Company Movement on treasury reserve – – – (15.0) (15.0) – (15.0) Financial Statements Credit to equity for equity-settled share-based payments – – – 9.4 9.4 – 9.4 149 Principal Subsidiary and Tax on share-based payment transactions – – 2.4 – 2.4 – 2.4 Associated Undertakings Changes in non-controlling interests – – – – – 0.2 0.2 150 Five Year Summary Transfer to retained earnings – – (0.2) 0.2 – – – 151 Shareholder Information Balance at 31 December 2013 251.8 733.0 121.2 (7.3) 1,098.7 (4.7) 1,094.0

100

BBA complete.indb 100 12/03/2014 12:45 Accounting Policies of the Group Amendments to IAS 36: Impairment of assets (IAS 36) clarifies Consolidated Financial Statements Accounting Policies of the Group the disclosure requirements with respect to recoverable amounts Basis of preparation of cash generating units. These amendments have been early The financial statements have been prepared in accordance with adopted with effect from 1 January 2013. International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore comply with Article 4 Financial reporting standards applicable for future financial periods of the EU IAS Regulation and the Companies Act 2006 applicable A number of EU-endorsed standards and amendments to to companies reporting under IFRS. They have also been existing standards and interpretations, which are described prepared in accordance with IFRS as issued by the International below, are effective for annual periods beginning on or after Accounting Standards Board. 1 January 2014 and have not been applied in preparing the The financial statements have been prepared using the Consolidated Financial Statements of the Group. None of these historical cost convention adjusted for the revaluation of certain are expected to have a material impact on the Consolidated financial instruments. The principal accounting policies adopted Financial Statements of the Group. are set out below. These policies have been consistently applied IFRS 10: Consolidated Financial Statements (IFRS 10), IFRS 11: with the prior year except where noted. Joint Arrangements (IFRS 11), IFRS 12: Disclosure of Interests in Other Entities (IFRS 12) and amendments to IAS 27: Consolidated New financial reporting requirements and Separate Financial Statements (IAS 27) and IAS 28: Amendments to IAS 1: Presentation of Financial Statements are Investments in Associates (IAS 28) are effective for financial applicable for financial reporting periods commencing 1 January reporting periods beginning on or after 1 January 2014. The 2013 and require items within other comprehensive income amendments to IAS 27 and IAS 28 have been made to align that may be classified to the income statement to be grouped them with IFRS 10, IFRS 11 and IFRS 12. together. The amendment relates to presentation only and has IFRS 10 defines the principle of control which is the basis for no impact on the reported results or balance sheet of the Group. determining which entities are consolidated in the Group’s financial IAS 19: Employee Benefits (Revised) (IAS 19R) is effective for statements. The standard also sets out the accounting requirements financial reporting periods beginning 1 January 2013 with for the preparation of consolidated financial statements. The Group retrospective application required. The principal impact of has reviewed the relationship of its subsidiary entities with their IAS 19R is that the concepts of expected return on assets and respective parent company. No changes to the accounting for interest expense on the defined benefit obligation as separate those entities within the consolidation are required. components of the defined benefit cost have been replaced by IFRS 11 requires parties to a joint arrangement to focus a single concept such that interest is now calculated on the net on their rights and obligations rather than its legal form in defined benefit deficit. This calculation uses the discount rate determining whether the arrangement is a joint operation or previously used to measure defined benefit pension liabilities a joint venture. A joint operator accounts for its share of assets, after allowance for any asset ceilings and additional liabilty under liabilities and corresponding revenues and expenses arising IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding from the arrangement, whereas a joint venturer accounts for Requirements, and their Interaction (IFRIC 14). In addition, plan an investment in an arrangement using the equity method. administration expenses, previously deducted from the No change to the accounting for joint operations is expected. expected return on scheme assets, are now included within IFRS 12 sets out the disclosure requirements for all forms operating profit. As a result of these amendments, the comparative of interests in other entities, including joint arrangements and financial information in the income statement and statement of associates. The additional disclosures aim to enable users to comprehensive income for the year ended 31 December 2012 evaluate the nature of, and risks associated with, the Group’s has been restated. For the year ended 31 December 2012, the interest in associates and joint operations, and the effects of those impact on the income statement is to reduce operating profit entities on the Group’s financial position, financial performance by $2.7 million and increase net finance costs by $2.5 million, and cash flows. IFRS 12 relates to disclosures only and has no and reduce actuarial losses by $5.2 million in the statement of impact on the reported results or balance sheet of the Group. comprehensive income. The pension deficit has remained In addition to the above, IFRS 9: Financial Instruments unchanged and so the balance sheet has not been restated. (IFRS 9) has been issued but has not yet been endorsed by the The impact on earnings per share is to decrease basic adjusted EU. Therefore, the date from which it becomes effective is not and unadjusted earnings per share by 1.1¢ per share to 27.9¢ and yet known. IFRS 9 addresses the classification, measurement 23.1¢ per share respectively, and to decrease diluted adjusted and recognition of financial assets and financial liabilities. earnings per share by 1.0¢ per share to 27.5¢ per share and diluted The Group is yet to assess the impact of IFRS 9 on the unadjusted earnings per share by 1.1¢ per share to 22.7¢ per share. consolidated financial statements. IFRS 13: Fair Value Measurement (IFRS 13) is applicable for financial reporting periods beginning 1 January 2013. Basis of consolidation It aims to improve consistency and comparability in fair value The Group financial statements incorporate the financial measurements and related disclosures by providing a precise statements of the Company, BBA Aviation plc, and its subsidiary definition of fair value and a single source of related disclosure undertakings under the acquisition method of accounting. requirements for use across other IFRSs. The standard has clarified The results of subsidiary undertakings acquired or sold during the the method for measuring fair value to incorporate credit year are included in the Consolidated Income Statement from the adjustments for the Company in addition to credit adjustments effective date of acquisition or up to the effective date of disposal for counterparties. The requirements do not extend the use of fair as appropriate. The Company controls an investee when it has value accounting. The Company has determined that any such the power to govern the financial and operating policies of an adjustments are immaterial for the year ended 31 December 2013. investee so as to obtain benefits from activities. 101

BBA complete.indb 101 12/03/2014 12:45 Consolidated Financial Statements Accounting Policies of the Group – continued intercompany transactions, sales by associated undertakings and Accounting Policies of the Group sales taxes. Goodwill on acquisitions represents the excess of the fair value Within the engine overhauls business, revenue and associated Financial statements of the consideration paid, the non-controlling interest, and the profit on engine overhauls are recognised on a percentage of 93 Independent Auditor’s Report to the members of BBA Aviation plc fair value of any previously held equity interest in the acquiree completion basis once the terms of the contract have been agreed with the customer and the ultimate profitability of the contract 96 Consolidated Income Statement over the fair value of the identifiable net assets, liabilities and contingent liabilities acquired. Where goodwill can only be can be determined with reasonable certainty. The percentage of 97 Consolidated Statement of Comprehensive Income determined on a provisional basis for a financial year, adjustments completion is generally based on hours incurred compared with 98 Consolidated Balance Sheet may be made to this balance for up to 12 months from the date management’s best estimate of the total hours of production. 99 Consolidated Cash Flow of acquisition. Goodwill is capitalised and presented as part of Within the engine overhauls business, revenue and associated Statement intangible assets in the Consolidated Balance Sheet. Goodwill is profit is recognised on engine sales. Where the engine sold is 100 Consolidated Statement of stated at cost less accumulated impairment losses and is tested subsequently leased back, the revenue and profit is only recognised Changes in Equity for impairment on an annual basis. where the lease can be categorised as an operating lease. 101 Accounting Policies of Associated undertakings are those investments other than the Group subsidiary undertakings where the Group is in a position to exercise Operating profit 106 Notes to the Consolidated Financial Statements a significant influence, typically through participation in the financial Operating profit is stated after charging exceptional items and 141 Company Balance Sheet and operating policy decisions of the investee. Joint ventures and after the share of results of associates and joint ventures but before investment income, finance costs and joint ventures. 142 Accounting Policies of associates are accounted for using the equity method of accounting the Company and are initially recognised at cost. The Consolidated Financial Exceptional items are items which are material or 144 Notes to the Company Statements include the Group’s share of the post-acquisition non-recurring in nature, including costs relating to acquisitions Financial Statements reserves of all such companies less provision for impairment. and disposals and the amortisation of acquired intangible assets. 149 Principal Subsidiary and Associated Undertakings Going concern Research and development expenditure 150 Five Year Summary The Directors have, at the time of approving the financial Research expenditure is charged against income in the year 151 Shareholder Information statements, a reasonable expectation that the Company and in which it is incurred. An internally generated intangible asset the Group have adequate resources to continue in operational arising from the Group’s development expenditure is recognised existence for the foreseeable future. Thus, they continue to adopt only if the asset can be separately identifiable, it is probable the going concern basis of accounting in preparing the financial that the asset will generate future economic benefits and the statements. Further detail is contained in the directors’ statement development costs of the asset can be measured reliably. of going concern on page 89 of the Directors’ Report. Intangible assets Foreign currencies Licences and contracts, other than manufacturing licences within Transactions in foreign currencies are translated into the entity’s the Legacy Support business, that are acquired separately are functional currency at the rate of exchange at the date of the stated at cost less accumulated amortisation and impairment. transaction. Amortisation is provided for on a straight-line basis over the useful Monetary assets and liabilities denominated in foreign life of the asset. The Legacy Support business acquires licences from currencies at the balance sheet date are translated into the original equipment manufacturers (OEMs) to become the alternate functional currency at the rates of exchange prevailing at that date. OEM for that product. The useful life is based on the underlying Any gain or loss arising from a change in exchange rates subsequent contract where that is a determinable period. Where the useful to the date of transaction is recognised in the income statement. life is indeterminable, a lifespan of 20 years is typically used. An The income statements of operations of which the functional annual review is performed to assess the licence’s remaining useful currency is other than the US dollar are translated into US dollars at life against the vitality of the underlying platform. Where the average exchange rate for the year. The balance sheets of these computer software is not an integral part of a related item of operations, including associated goodwill, are translated into US computer hardware, the software is treated as an intangible asset. the costs incurred dollars at the exchange rates ruling at the balance sheet date. Computer software is capitalised on the basis of to acquire and bring to use the specific software. Amortisation is All exchange differences arising on consolidation are recognised provided on the cost of software and is calculated on a initially in other comprehensive income and only in the income straight-line basis over the useful life of the software. statement in the period in which the entity is eventually disposed of. Intangible assets, other than goodwill, arising on All other translation differences are taken to the income acquisitions are capitalised at fair value. An intangible asset will statement, with the exception of differences on foreign currency be recognised as long as the asset is separable or arises from borrowing and derivative instruments to the extent that they are contractual or other legal rights, and its fair value can be used to provide a hedge against the Group’s equity investments measured reliably. Amortisation is provided on the fair value of in overseas operations. These translation differences are the asset and is calculated on a straight-line basis over its useful recognised in other comprehensive income together with the life, which typically is the term of the licence or contract. exchange difference on the net investment in those operations. Goodwill and intangible assets arising on the acquisition of a Property, plant and equipment foreign entity are treated as assets and liabilities of the foreign Property, plant and equipment is stated in the balance entity and translated at the closing rate of exchange. sheet at cost less accumulated depreciation and provision for impairments. Depreciation is provided on the cost of property, Revenue recognition plant and equipment less estimated residual value and is Revenue is measured at the fair value of the consideration calculated on a straight line basis over the following estimated received or receivable, and represents amounts receivable for 102 useful lives of the assets: goods supplied and services provided by the Group excluding

BBA complete.indb 102 12/03/2014 12:45 Derivative financial instruments and hedge accounting Consolidated Financial Statements Land Not depreciated Accounting Policies of the Group Freehold buildings 40 years maximum Derivative financial instruments utilised by the Group comprise Leasehold buildings Shorter of useful life interest rate swaps, cross-currency swaps and foreign exchange and lease term contracts. All such instruments are used for hedging purposes to Fixtures and equipment (including manage the risk profile of an underlying exposure of the Group essential commissioning costs) 3-18 years in line with the Group’s risk management policies. All derivative instruments are recorded on the balance sheet at fair value. Recognition of gains or losses on derivative instruments Tooling, vehicles, computer and office equipment are depends on whether the instrument is designated as a hedge categorised within fixtures and equipment. and the type of exposure it is designed to hedge. Finance costs which are directly attributable to the The effective portion of gains or losses on cash flow construction of major items of property, plant and equipment hedges is recognised in other comprehensive income until the are capitalised as part of those assets. The commencement of impact from the hedged item is recognised in the income capitalisation begins when both finance costs and expenditures statement. The ineffective portion of such gains and losses is for the asset are being incurred and activities that are necessary recognised immediately within ‘other gains and losses’ in the to get the asset ready for use are in progress. Capitalisation income statement. ceases when substantially all the activities that are necessary Hedges of net investments in non US dollar territories are to get the asset ready for use are complete. accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the Impairment of goodwill, intangible assets and property, plant hedge is recognised in other comprehensive income. The gain or and equipment loss relating to the ineffective portion is recognised immediately, At each balance sheet date, the Group reviews the carrying value and is included within operating profit. Gains and losses deferred of its intangible and tangible assets to determine whether there in the foreign currency translation reserve are recognised in profit is any indication that those assets have suffered an impairment or loss on disposal of the foreign operation. loss. If any such indication exists, the recoverable amount of Changes in the fair value of the foreign exchange contracts the asset is estimated in order to determine the extent of the classified as fair value through profit or loss (FVTPL) and those impairment loss. Where the asset does not generate cash flows that do not qualify for hedge accounting, are recognised within that are independent from other assets, the Group estimates the operating profit in the income statement as they arise. Changes recoverable amount of the cash-generating unit to which the in the fair value of interest rate swaps classified as FVTPL are asset belongs. An intangible asset with an indefinite life is tested charged to net interest within the income statement. for impairment annually and whenever there is an indication that the asset may be impaired. Other financial instruments The recoverable amount is the higher of fair value less costs Financial assets and financial liabilities are recognised on the to sell and value in use. In assessing value in use, the estimated Group’s balance sheet when the Group becomes a party to the future cash flows are discounted to their present value using a contractual provisions of the instrument. Financial assets are pre-tax discount rate that reflects current market assessments accounted for at the trade date. of the time value of money. The risks specific to the asset are

reflected as an adjustment to the future estimated cash flows. Cash and cash equivalents If the recoverable amount of an asset or cash-generating Cash and cash equivalents comprise cash on hand and deemed unit is estimated to be less than its carrying amount, the carrying deposits, and other short-term highly liquid investments with amount of the asset or cash-generating unit is reduced to original maturities of three months or less which are readily its recoverable amount. An impairment loss is recognised convertible to a known amount of cash and are subject to immediately in the income statement. an insignificant risk of changes in value. Bank overdrafts which Where an impairment loss subsequently reverses, the are repayable on demand are included within cash and cash carrying amount of the asset or cash-generating unit is increased equivalents for the purpose of the cash flow statement. to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount Trade and other receivables that would have been determined had no impairment loss been Trade and other receivables excluding derivative assets do not recognised for the asset or cash-generating unit in prior years. carry any interest and are stated at nominal value as reduced by A reversal of an impairment loss is recognised as income appropriate allowances for estimated irrecoverable amounts. immediately. Impairment losses recognised in respect of goodwill are not reversed in subsequent periods. Financial liabilities and equity Financial liabilities and equity instruments are classified according Inventories to the substance of the contractual arrangements entered into. Inventory is stated at the lower of cost and net realisable value. An equity instrument is any contract that evidences a residual Cost comprises the cost of raw materials and an appropriate interest in the assets of the Group after deducting all of proportion of labour and overheads in the case of work in its liabilities. progress and finished goods. Cost is calculated using the first in first out method in the Flight Support segment, and weighted average method in the Aftermarket Services segment. Provision is made for slow moving or obsolete inventory as appropriate. 103

BBA complete.indb 103 12/03/2014 12:45 Consolidated Financial Statements Accounting Policies of the Group – continued arising from the restructuring, and comprises those amounts Accounting Policies of the Group that are both necessarily entailed by the restructuring and not Borrowings associated with the ongoing activities of the entity. Financial statements Interest bearing loans and overdrafts are initially recorded at 93 Independent Auditor’s Report to the members of BBA Aviation fair value, which equates to proceeds less direct issue costs at Onerous contracts plc inception. Subsequent to initial recognition, borrowings are Present obligations arising under onerous contracts are recognised 96 Consolidated Income Statement measured at amortised cost, using the effective interest rate and measured as provisions. An onerous contract is considered to 97 Consolidated Statement of method, except where they are identified as a hedged item in exist where the Group has a contract under which the unavoidable Comprehensive Income a fair value hedge. Any difference between the proceeds, net of costs of meeting the obligations under the contract exceed the 98 Consolidated Balance Sheet transaction costs, and the amount due on settlement is recognised economic benefits expected to be received under it. 99 Consolidated Cash Flow in the income statement over the term of the borrowings. Statement Post-retirement benefits 100 Consolidated Statement of Changes in Equity Trade and other payables Payments to defined contribution retirement benefit schemes Trade payables, excluding derivative liabilities, are not interest are charged as an expense as they fall due. 101 Accounting Policies of the Group bearing and are stated at amortised cost. For defined benefit retirement benefit schemes, the 106 Notes to the Consolidated cost is determined using the Projected Unit Credit Method, Financial Statements Equity instruments with valuations under IAS 19R being carried out annually as 141 Company Balance Sheet Equity instruments issued by the Company are recorded at the at 31 December. Actuarial gains and losses are recognised in 142 Accounting Policies of proceeds received, net of direct issue costs. full in the period in which they occur. They are recognised the Company outside of profit or loss and presented in the statement of 144 Notes to the Company Financial Statements Leases comprehensive income. Leases are classified as finance leases when the terms of the lease The service cost of providing retirement benefits to 149 Principal Subsidiary and Associated Undertakings transfer substantially all the risks and rewards of ownership to employees during the year is charged to operating profit in 150 Five Year Summary the lessee. All other leases are classified as operating leases. the year. Any past service cost is recognised immediately to 151 Shareholder Information Assets obtained under finance leases are capitalised within the extent that the benefits are already vested, and otherwise property, plant and equipment and the capitalisation values written is amortised on a straight line basis over the average period until off on astraight line basis over the shorter of the period of the the benefits become vested. The interest cost on the net defined lease or the useful economic life of the asset. Obligations to the benefit deficit is included within finance costs. lessors relating to finance leases, net of finance charges in respect The retirement benefit obligation recognised in the balance of future periods are recorded as liabilities. The interest element sheet represents the present value of the defined benefit of the obligation is allocated over the lease term to produce a obligation as adjusted for unrecognised past service costs, and constant rate of interest on the outstanding capital payments. reduced by the fair value of scheme assets plus any additional Operating leases are not recognised in the Group’s balance liability to be recognised in accordance with IFRIC 14 and the sheet. The rental payments are charged to the income statement minimum funding requirement. Any asset resulting from this on a straight line basis over the life of the lease. calculation is only recognised to the extent that it is recoverable. Defined benefit scheme contributions are determined Provisions by valuations undertaken by independent qualified actuaries. Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable Share-based payments that an outflow of economic benefits will be required to settle The Group operates a number of cash and equity settled that obligation and the obligation can be reliably estimated. share-based compensation plans. The fair value of the The amount recognised as a provision is the best estimate compensation is recognised in the income statement as an of the consideration required to settle the present obligation at the expense. The total amount to be expensed over the vesting balance sheet date, taking into account the risks and uncertainties period is determined by reference to the fair value of the options surrounding the obligation. Where a provision is measured using granted and calculated using the valuation technique most the cash flows estimated to settle the present obligation, its appropriate to each type of award. These include Black-Scholes carrying amount is determined by discounting the expected calculations and Monte Carlo simulations. For cash settled future cash flows at an appropriate pre-tax discount rate. options, the fair value of the option is revisited at each balance When some or all of the economic benefits required sheet date. For both cash and equity-settled options, the Group to settle a provision are expected to be recovered from a third revises its estimates of the number of options that are expected party, the receivable is recognised as an asset if it is virtually to become exercisable at each balance sheet date. certain that reimbursement will be received on settlement of a related provision and the amount of the receivable can be Taxation measured reliably. The charge for taxation is based on the profit for the year and comprises current and deferred taxation. Current tax is calculated Restructurings at tax rates which have been enacted or substantively enacted A restructuring provision is recognised when the Group has as at the balance sheet date. developed a detailed formal plan for the restructuring and has Deferred taxation takes into account taxation deferred due raised a valid expectation in those affected that it will carry out to temporary differences between the treatment of certain items the restructuring by starting to implement the plan or announcing for taxation and accounting purposes. Deferred tax is accounted its main features to those affected by it. The measurement of for using the balance sheet liability method and is the tax expected 104 a restructuring provision includes only the direct expenditure to be payable or recoverable on differences between the carrying

BBA complete.indb 104 12/03/2014 12:45 amounts of assets and liabilities in the financial statements and property, plant and equipment at the balance sheet date Consolidated Financial Statements Accounting Policies of the Group the corresponding tax bases in the computation of taxable profit. were $837.6 million (2012: $834.7 million), $219.7 million No provision is made for temporary differences on (2012: $174.1 million) and $557.0 million (2012: $511.5 million) unremitted earnings of foreign subsidiaries, joint ventures or respectively. Details regarding the carrying value of goodwill, associates where the Group has control and the reversal of the intangible assets and property, plant and equipment and temporary difference is not foreseeable. assumptions used in performing the impairment reviews The carrying amount of deferred tax assets is reviewed at are provided in notes 8 and 9. each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available Inventories to allow all or part of the asset to be recovered. As at 31 December 2013, the Group had $199.7 million Deferred tax is calculated at tax rates which have been (2012: $261.8 million) of inventories on its balance sheet, of enacted or substantively enacted at the balance sheet date and which $186.6 million (2012: $250.2 million) relates to the that are expected to apply in the period when the liability is Aftermarket Services division. Judgement is necessary in settled or the asset is realised. Deferred tax is charged or credited assessing the excess and obsolete inventory provision required. in the income statement, except when it relates to items charged Key to the estimation of this provision is an assessment of the or credited to the statement of comprehensive income, in which remaining lives of the engine platforms, the estimated frequency case the deferred tax is also dealt with in the statement of of overhauls, the expected future usage of inventory based upon comprehensive income. past experience and the level of write-offs in previous years. Details of inventories and related provisions are provided in note 11. Assets and associated liabilities classified as held for sale Assets classified as held for sale are measured at the lower of Provisions carrying amount and fair value less costs to sell. Assets are The Group exercises judgement in measuring and recognising classified as held for sale if their net carrying amount will be provisions and the exposures to contingent liabilities related recovered through a sale transaction rather than through to pending litigation or other outstanding claims subject to continuing use. This condition is regarded as met only when the negotiated settlement, mediation, arbitration or government sale is highly probable and the asset is available for immediate regulation, as well as other contingent liabilities (see note 18 to sale in its present condition. Management must be committed the Consolidated Financial Statements). Judgement is necessary to the sale which should be expected to qualify for recognition in assessing the likelihood that a pending claim will succeed, as a completed sale within one year from the date of classification. or a liability will arise and to quantify the possible range of the When the Group is committed to a sale plan involving loss financial settlement. Because of the inherent uncertainty in this of control of a subsidiary, all of the assets and liabilities of that evaluation process, actual losses may be different from the subsidiary are classified as held for sale when the criteria described originally estimated provision. above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Pensions and other post-retirement benefits Determining the defined benefit obligation and the income Critical accounting judgements and key sources of estimation statement charge in respect of pension and other post- uncertainty retirement benefit schemes requires an estimation of certain The key assumptions concerning the future, and other key sources assumptions which include the discount rate, inflation rate, of estimation uncertainty at the balance sheet date, that have a mortality and length of service. These assumptions are significant risk of causing a material adjustment to the carrying determined having taken advice from qualified actuaries. amounts of assets and liabilities within the next financial year, are The net pension liability related to defined benefit type schemes discussed below. The judgements used by management in the at the balance sheet date was $57.6 million (2012: $66.3 million). application of the Group’s accounting policies in respect of these Details regarding the carrying value and assumptions used in key areas of estimation are considered to be the most significant. arriving at the carrying values are provided in note 19.

Revenue recognition Taxation In applying the Group’s accounting policy on revenue As part of the process for preparing the Group’s financial recognition, the Group exercises judgement in respect of the statements, management is required to calculate income percentage of completion of engines being overhauled and the tax accruals. This process involves estimating the current tax categorisation of leases as being operating leases on engine exposures together with assessing temporary differences sales, when the engines are subsequently leased back. resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and Impairment of goodwill, intangible assets and property, plant liabilities, which are included in the balance sheet. and equipment As at 31 December 2013, the Group had a corporate tax Determining whether goodwill, intangible assets or property, liability of $69.6 million (2012: $96.1 million). While the Group plant and equipment are impaired requires an estimation of the aims to ensure the accruals for its tax liabilities are accurate, the value in use of the cash-generating units to which the goodwill process of agreeing tax liabilities with the relevant tax authorities has been allocated or the individual assets. The value in use can take several years. Management judgement is therefore calculation requires the entity to estimate future cash flows required in determining the provision for income tax and the expected to arise from the cash-generating unit or asset and recognition of deferred tax assets and liabilities; however, the a suitable discount rate in order to calculate present value. actual tax liabilities could differ from the amounts accrued. The carrying amounts of goodwill, intangible assets and As at 31 December 2013, the Group had a deferred tax liability 105 of $87.8 million (2012: $82.0 million).

BBA complete.indb 105 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements

Financial statements 1. Segmental information 93 Independent Auditor’s Report to IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are the members of BBA Aviation plc regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. 96 Consolidated Income Statement The Group provides information to the Chief Executive on the basis of components that are substantially similar within the 97 Consolidated Statement of segments in the following aspects: Comprehensive Income — the nature of the long-term financial performance; 98 Consolidated Balance Sheet — the nature of the products and services; 99 Consolidated Cash Flow Statement — the nature of the production processes; — the type of class of customer for the products and services; and 100 Consolidated Statement of Changes in Equity — the nature of the regulatory environment. 101 Accounting Policies of the Group 106 Notes to the Consolidated Based on the above, the primary reportable segments of the Group have been deemed to be Flight Support, which comprises Financial Statements Signature Flight Support and ASIG, and Aftermarket Services, which comprises Engine Repair and Overhaul, Legacy Support and APPH. 141 Company Balance Sheet The businesses within the Flight Support segment provide refuelling, ground handling and other services to the business, 142 Accounting Policies of general and commercial aviation markets. The businesses within the Aftermarket Services segment maintain and support engines the Company and aerospace components, sub-systems and systems. 144 Notes to the Company Sales between segments are immaterial. Financial Statements

149 Principal Subsidiary and Flight Aftermarket Unallocated Associated Undertakings Support Services Total Corporate Total 150 Five Year Summary Business Segments $m $m $m $m $m 151 Shareholder Information 2013 External revenue 1,375.9 842.7 2,218.6 – 2,218.6

Underlying operating profit 116.3 101.3 217.6 (17.5) 200.1 Exceptional items (9.8) (6.0) (15.8) (14.9) (30.7) Segment result* 106.5 95.3 201.8 (32.4) 169.4 Underlying operating margin 8.5% 12.0% 9.8% – 9.0%

Net finance costs (24.2) Profit before tax 145.2

*Segment result includes $1.4 million profit of associates and joint ventures within Flight Support.

Other information Capital additions* 53.0 31.7 84.7 5.1 89.8 Depreciation and amortisation 49.5 20.5 70.0 0.5 70.5

*Capital additions represent cash expenditures in the year.

Balance sheet Total assets 1,397.5 890.0 2,287.5 176.9 2,464.4 Total liabilities (229.1) (193.7) (422.8) (947.6) (1,370.4) Net assets/(liabilities) 1,168.4 696.3 1,864.7 (770.7) 1,094.0

106

BBA complete.indb 106 12/03/2014 12:45 1. Segmental information – continued Consolidated Financial Statements Notes to the Consolidated Flight Aftermarket Unallocated Financial Statements Support Services Total Corporate Total Restated Restated Restated Restated Restated Business Segments $m $m $m $m $m 2012 External revenue 1,321.8 857.1 2,178.9 – 2,178.9

Underlying operating profit 110.9 99.5 210.4 (17.7) 192.7 Exceptional items (16.5) (14.4) (30.9) (1.8) (32.7) Segment result* 94.4 85.1 179.5 (19.5) 160.0 Underlying operating margin 8.4% 11.6% 9.7% – 8.8%

Net finance costs (34.9) Profit before tax 125.1 *Segment result includes $1.6 million profit of associates and joint ventures within Flight Support.

Other information Capital additions* 34.2 20.5 54.7 1.8 56.5 Depreciation and amortisation 47.4 20.4 67.8 0.3 68.1

*Capital additions represent cash expenditures in the year.

Balance sheet Total assets 1,303.3 853.9 2,157.2 229.0 2,386.2 Total liabilities (206.7) (200.1) (406.8) (958.0) (1,364.8) Net assets/(liabilities) 1,096.6 653.8 1,750.4 (729.0) 1,021.4

Revenue by Revenue by Capital Non current destination origin additions* assets Geographical Segments $m $m $m $m 2013 United Kingdom 260.7 423.5 18.7 233.3 Mainland Europe 132.3 41.8 0.3 46.0 North America 1,701.9 1,741.5 69.6 1,359.3 Rest of World 123.7 11.8 1.2 14.0 Total 2,218.6 2,218.6 89.8 1,652.6

2012 United Kingdom 282.0 401.0 13.8 253.1 Mainland Europe 125.7 42.1 0.8 44.0 North America 1,650.9 1,720.6 41.9 1,278.8 Rest of World 120.3 15.2 – 9.1 Total 2,178.9 2,178.9 56.5 1,585.0

An analysis of the Group’s revenue for the year is as follows: Revenue from Revenue from sale of goods services 2013 2012 2013 2012 $m $m $m $m Flight Support 837.7 821.1 538.2 500.7 Aftermarket Services 271.9 247.5 570.8 609.6 1,109.6 1,068.6 1,109.0 1,110.3

* Capital additions represent cash expenditures in the year. A portion of the Group’s revenue from the sale of goods denominated in foreign currencies is cash flow hedged. Revenue from the sale of goods and services of $1,109.6 million (2012: $1,068.6 million) includes a gain of $2.1 million (2012: gain of $0.8 million) in respect of the recycling of the effective amount of foreign currency derivatives used to hedge foreign currency revenue.

107

BBA complete.indb 107 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 2. Profit for the year 93 Independent Auditor’s Report to Profit for the year has been arrived at after charging/(crediting): the members of BBA Aviation plc 96 Consolidated Income Statement Exceptional items 97 Consolidated Statement of In the year ended 31 December 2013, exceptional items amounted to a charge of $7.6 million (2012: $23.2 million) of which Comprehensive Income $30.7 million (2012: $32.7 million) is included within operating profit and a credit of $5.4 million (2012: $nil) within investment 98 Consolidated Balance Sheet income. Exceptional items comprise restructuring expenses of $6.1 million (2012: $17.0 million); amortisation of intangible assets 99 Consolidated Cash Flow Statement arising on acquisition and valued in accordance with IFRS 3 of $9.0 million (2012: $7.6 million) included within administrative expenses; $8.7 million (2012: $6.6 million) of transaction costs; and $6.9 million (2012: $1.5 million) of environmental costs in relation to previously 100 Consolidated Statement of Changes in Equity disposed of businesses included within other operating expenses. $5.4 million credit (2012: $nil) within investment income comprises 101 Accounting Policies of the Group the gain on disposal of the Group’s investment in Lider Signature SA. 106 Notes to the Consolidated Restructuring expenses for the year of $6.1 million principally relate to the reorganisation of management into two operating Financial Statements divisions. Restructuring expenses of $17.0 million incurred during the year ended 31 December 2012 comprised $8.6 million in respect 141 Company Balance Sheet of re-sizing manufacturing capacity, $3.6 million for management reorganisation and $4.8 million investment in efficiency projects. 142 Accounting Policies of In the year ended 31 December 2013, an exceptional tax credit of $17.7 million (2012: $9.5 million) was recognised in the the Company income statement. This credit relates to the tax impact on the exceptional items explained above of $6.5 million (2012: $9.5 million) 144 Notes to the Company and $11.2 million release of tax provisions following progress made in relation to open tax years. Financial Statements Underlying profit is shown before exceptional items on the face of the income statement because the directors consider 149 Principal Subsidiary and Associated Undertakings that this gives a useful indication of underlying performance and better visibility of key performance indicators. 150 Five Year Summary Other 151 Shareholder Information 2013 2012 $m $m Net foreign exchange gains (0.3) (0.3) Research and development costs 4.4 3.9 Depreciation of property, plant and equipment 53.9 52.7 Amortisation of intangible assets (included in cost of sales) 2.6 2.4 Amortisation of intangible assets (included in administration expenses) 14.0 13.0 Total depreciation and amortisation expense 70.5 68.1

Total employee costs (note 7) 556.4 525.8 Cost of inventories recognised as an expense within cost of sales 1,094.1 1,103.1 Cost of inventories written down 0.1 –

The analysis of auditor’s remuneration is as follows: 2013 2012 $m $m Fees payable to the Company’s auditor for the audit of the Group’s annual accounts 1.9 1.8 The audit of the Company’s subsidiaries pursuant to legislation 0.2 0.2 Total audit fees 2.1 2.0

Other assurance services 0.2 0.2 Tax services 0.1 0.1 0.3 0.3 Total fees payable to the Company’s auditor 2.4 2.3

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BBA complete.indb 108 12/03/2014 12:45 3. Investment income, finance costs and other gains and losses Consolidated Financial Statements Notes to the Consolidated 2012 Financial Statements 2013 Restated $m $m Interest on bank deposits 4.6 5.8 Underlying investment income 4.6 5.8 Exceptional gain on disposal of investment available for sale 5.4 – Total investment income 10.0 5.8

Interest on bank loans and overdrafts (15.6) (16.6) Interest on loan notes (17.0) (17.0) Interest on obligations under finance leases (0.3) (0.4) Net finance expense on pension schemes (2.3) (2.3) Other finance costs (1.3) (1.6) Total borrowing costs (36.5) (37.9)

Less amounts included in the cost of qualifying assets 0.9 0.6 Fair value losses on interest rate swaps designated as cash flow hedges transferred from equity (6.1) (10.3) Fair value gains on interest rate swaps designated as fair value hedges 7.5 6.9 Total finance costs (34.2) (40.7)

Borrowing costs included in the cost of qualifying assets during the year arose on the general borrowing pool and are calculated by applying a capitalisation rate of 4.0% (2012: 4.5%) to expenditure on such assets, which represents the weighted average interest rate for the currency in which the expenditure has been made.

4. Income tax expense 2013 2012 Recognised in the income statement $m $m Current tax charge 17.0 8.2 Adjustments in respect of prior years – current tax (16.6) (1.5) Deferred tax (note 20) 7.8 11.5 Adjustments in respect of prior years – deferred tax (note 20) (1.1) (3.4) Income tax expense for the year 7.1 14.8

Domestic income tax is calculated at 23.25% (2012: 24.5%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. The $16.6 million of Adjustments in respect of prior years – current tax, includes $11.2 million in respect of the release of tax provisions as explained in note 2.

The total charge for the year can be reconciled to the accounting profit as follows: 2013 2012 $m $m Profit before tax: 145.2 125.1

Tax at the rates prevailing in the relevant tax jurisdictions 26.2% (2012: 26.4%) 38.0 33.0 Tax effect of income that is not taxable in determining taxable profit (19.2) (10.5) Items on which deferred tax has not been recognised 0.6 (4.9) Tax rate changes 1.8 (1.6) Difference in tax rates on overseas earnings 3.6 3.7 Adjustments in respect of prior years (17.7) (4.9) Tax expense for the year 7.1 14.8

The applicable tax rate of 26.2% (2012: 26.4%) represents a blend of the tax rates of the jurisdictions in which taxable profits have arisen. The change from prior year is due to a change in the proportion of profits that have arisen in each jurisdiction and the benefits associated with certain financing structures implemented.

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BBA complete.indb 109 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 4. Income tax expense – continued 93 Independent Auditor’s Report to Tax credited to other comprehensive income and equity is as follows: 2013 2012 the members of BBA Aviation plc Recognised in other comprehensive income $m $m 96 Consolidated Income Statement Tax on items that will not be reclassified subsequently to profit or loss 97 Consolidated Statement of Comprehensive Income Current tax credit on actuarial gains/losses 2.2 2.0 98 Consolidated Balance Sheet Deferred tax credit on actuarial gains/losses 1.5 5.0 99 Consolidated Cash Flow 3.7 7.0 Statement 100 Consolidated Statement of Tax on items that may be reclassified subsequently to profit or loss Changes in Equity Current tax credit on foreign exchange movements 0.6 0.8 101 Accounting Policies of the Group Total tax credit within other comprehensive income 4.3 7.8 106 Notes to the Consolidated Financial Statements Recognised in equity 141 Company Balance Sheet Current tax credit on share-based payments movements 0.6 1.0 142 Accounting Policies of Deferred tax credit on share-based payments movements 1.8 0.5 the Company 144 Notes to the Company Total tax credit within equity 2.4 1.5 Financial Statements 149 Principal Subsidiary and Total tax credit within other comprehensive income and equity 6.7 9.3 Associated Undertakings 150 Five Year Summary 5. Dividends 151 Shareholder Information On 24 May 2013, the 2012 final dividend of 10.45¢ per share (total dividend $50.1 million) was paid to shareholders (2012: the 2011 final dividend of 9.95¢ per share (total dividend $47.7 million) was paid on 25 May 2012). On 1 November 2013, the 2013 interim dividend of 4.40¢ per share (total dividend $21.2 million) was paid to shareholders (2012: the 2012 interim dividend of 4.20¢ per share (total dividend $20.2 million) was paid on 2 November 2012). In respect of the current year, the directors propose that a final dividend of 11.0¢ per share will be paid to shareholders on 23 May 2014. The proposed dividend is payable to all shareholders on the register of members on 11 April 2014. The total estimated dividend to be paid is $52.8 million. This dividend is subject to approval by shareholders at the Annual General Meeting and in accordance with IAS 10: Events after the Reporting Period has not been included as a liability in these financial statements.

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BBA complete.indb 110 12/03/2014 12:45 6. Earnings per share Consolidated Financial Statements Notes to the Consolidated The calculation of the basic and diluted earnings per share is based on the following data: Financial Statements 2013 2012 Restated $m $m Basic and diluted Earnings: Profit for the year 138.1 110.3 Non-controlling interests 0.4 0.3 Basic earnings attributable to ordinary shareholders 138.5 110.6 Exceptional items (net of tax) 7.6 23.2 Adjusted earnings 146.1 133.8

Number of shares 16 Weighted average number of 29 /21p ordinary shares: For basic earnings per share 478.5 478.8 Exercise of share options 7.1 8.4 For diluted earnings per share 485.6 487.2

Earnings per share Basic: Adjusted 30.5¢ 27.9¢ Unadjusted 28.9¢ 23.1¢

Diluted: Adjusted 30.1¢ 27.5¢ Unadjusted 28.5¢ 22.7¢

Adjusted earnings per share is shown calculated on earnings before exceptional items (note 2) because the directors consider that this gives a useful indication of underlying performance.

7. Employees 2013 2012 Average monthly number (including Executive Directors) number number By segment Flight Support 8,841 8,386 Aftermarket Services 2,032 1,993 10,873 10,379 By region United Kingdom 2,691 2,633 Mainland Europe 131 132 North America 7,979 7,543 Rest of World 72 71 10,873 10,379

2013 2012 Restated $m $m Employment costs Wages and salaries 499.5 469.9 Social security costs 43.4 44.5 Pension costs (note 19) 13.5 11.4 556.4 525.8

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BBA complete.indb 111 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 8. Intangible assets 93 Independent Auditor’s Report to Licences Licences the members of BBA Aviation plc and Computer and Computer Goodwill 96 Consolidated Income Statement contracts software Total Goodwill contracts software Total 2013 2013 2013 2013 2012 2012 2012 2012 97 Consolidated Statement of $m $m $m $m $m $m $m $m Comprehensive Income 98 Consolidated Balance Sheet Cost Beginning of year 834.7 230.9 27.7 1,093.3 806.6 221.9 26.6 1,055.1 99 Consolidated Cash Flow Statement Exchange adjustments 2.0 1.7 0.2 3.9 5.0 2.6 0.2 7.8 100 Consolidated Statement of Acquisitions 10.7 19.6 – 30.3 22.5 5.2 – 27.7 Changes in Equity Additions – 35.7 6.4 42.1 – 4.0 1.4 5.4 101 Accounting Policies of the Group Disposals – – (0.1) (0.1) – (2.7) (1.5) (4.2) 106 Notes to the Consolidated Transfers (to)/from other asset categories – – – – – (0.1) 1.0 0.9 Financial Statements Acquisitions in prior years (1.3) – – (1.3) 0.6 – – 0.6 141 Company Balance Sheet Transfer to assets held for sale (8.5) – (3.5) (12.0) – – – – 142 Accounting Policies of the Company End of year 837.6 287.9 30.7 1,156.2 834.7 230.9 27.7 1,093.3 144 Notes to the Company Financial Statements Amortisation 149 Principal Subsidiary and Beginning of year – (61.4) (23.1) (84.5) – (50.1) (22.2) (72.3) Associated Undertakings Exchange adjustments – (0.6) (0.2) (0.8) – (0.6) (0.2) (0.8) 150 Five Year Summary Amortisation charge for the year – (14.5) (2.1) (16.6) – (13.4) (2.0) (15.4) 151 Shareholder Information Disposals – – – – – 2.7 1.5 4.2 Transfers to other asset categories – – – – – – (0.2) (0.2) Transfer to assets held for sale – – 3.0 3.0 – – – – End of year – (76.5) (22.4) (98.9) – (61.4) (23.1) (84.5)

Carrying amount End of year 837.6 211.4 8.3 1,057.3 834.7 169.5 4.6 1,008.8 Beginning of year 834.7 169.5 4.6 1,008.8 806.6 171.8 4.4 982.8

Included within the amortisation charge for intangible assets of $16.6 million (2012: $15.4 million) is amortisation of $9.0 million (2012: $7.6 million) in relation to the amortisation of intangible assets acquired and valued in accordance with IFRS 3 and disclosed as an exceptional item. Licences and contracts are amortised over the period to which they relate, which is on average 16 years (2012: 16 years). Computer software is amortised over its estimated useful life, which is on average five years (2012: five years).

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BBA_ARA_2013_Financials_92-.indd 112 14/03/2014 18:19 8. Intangible assets – continued Consolidated Financial Statements Notes to the Consolidated Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to Financial Statements benefit from the business combination. The carrying amount of goodwill had been allocated as follows: 2013 2012 $m $m Flight Support: Signature Flight Support 440.4 428.4 ASIG 183.9 185.7

Aftermarket Services: Engine Repair and Overhaul 142.0 141.6 Legacy Support 71.3 70.5 APPH – 8.5 837.6 834.7

As at 31 December 2013, included with assets held for sale is $8.5 million of goodwill relating to APPH (see note 25). The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The Group has determined the recoverable amount of each CGU from value in use calculations. The value in use calculations are based on cash flow forecasts derived from the most recent budgets and strategic plans for the next three years, as approved by management. Cash flows beyond three years are extrapolated using estimated growth rates. The resultant cash flows are discounted using a pre-tax discount rate appropriate for the relevant CGU.

Key assumptions The key assumptions for the value in use calculations are as follows:

Sales volumes, selling prices and cost increases over the three years covered by management’s detailed plans Sales volumes are based on industry forecasts and management estimates for the businesses in which each CGU operates, including forecasts for business and general aviation (B&GA) flying hours, aircraft engine cycles, and US military spending. Selling prices and cost increases are based on past experience and management expectations of future changes in the market. Overall, a balanced approach to volume levels, selling prices and cost increases has been taken. The extent to which these assumptions affect each principle CGU with a significant level of goodwill are described below. Signature Flight Support and Engine Repair and Overhaul both operate in the business and general aviation market. Signature Flight Support is the world’s largest and market leading fixed base operation (FBO) network for business aviation providing full services support for B&GA travel, focused on passenger handling and customer amenities such as refuelling, hangar and office rentals, and other technical services. Engine Repair and Overhaul (ERO) is a leading independent engine repair service provider to the B&GA market with strong relationships with all major engine OEMs. ASIG operates in the commercial aviation market. It is a global provider of ground, fuel and airport facility services to airlines, airports, oil companies and industry partners, delivering flexible and comprehensive service solutions including refuelling, ground handling, aircraft technical support services, facilities equipment maintenance and de-icing. Legacy Support operates in the military and commercial sectors and 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. In B&GA, growth is measured principally in relation to B&GA flying hours. Whilst B&GA flying hours have made some recovery from the trough experienced in 2009, they remain c20% below their peak in the core market of the United States. Whilst full recovery is taking longer than in previous cycles, there is no sign of any structural change in the market and the outlook for the medium and long-term remains good, with overall US B&GA flying hours expected to grow at c1-2x GDP growth over the next ten years. In the commercial sector, growth is measured in commercial aircraft movements and our forecasts reflect the impact of both increasing passenger demand and growth in fleets, with the long-term aircraft movement growth remaining at least in line with GDP in our core US market. Stronger growth is expected within the Asia Pacific markets, to which BBA has some exposure. In the military market, government budgetary constraints, in the US in particular, add uncertainty to overall military expenditure. However, management believes these constraints have more impact on the demand for new equipment (particularly on development of new platforms), with a knock-on increase in requirements in keeping the existing and ageing fleet flying for longer. It is these planes which Legacy supports, thereby insulating the business from the impact of the budgetary constraints.

Growth rates used for the periods beyond those covered by management’s strategic plan Growth rates are derived from management’s estimates, which take into account the long-term nature of the industry in which each CGU operates, external industry forecasts of long-term growth in the aerospace and defence sectors, the maturity of the platforms supplied by the CGU and the technological content of the CGU’s products. For the purpose of impairment testing, a conservative approach has been used and where the derived rate is higher than the long-term GDP growth rates for the countries in which the CGU operates, the latter has been used. As a result, an estimated growth rate of 2.7% has been used, which reflects forecast long-term US GDP growth. 113

BBA complete.indb 113 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 8. Intangible assets – continued 93 Independent Auditor’s Report to Discount rates applied to future cash flows the members of BBA Aviation plc The Group’s pre-tax weighted average cost of capital (WACC) has been used as the foundation for determining the discount rates to 96 Consolidated Income Statement be applied. The WACC has then been adjusted to reflect risks specific to the CGU not already reflected in the future cash flows for that 97 Consolidated Statement of CGU. The discount rates used were in the range of 12.1% to 12.7% for the CGUs within Flight Support and 12.6% to 13.5% for the CGUs Comprehensive Income within Aftermarket Services. 98 Consolidated Balance Sheet 99 Consolidated Cash Flow Statement Sensitivity analysis A sensitivity analysis was carried out for each CGU to determine the extent to which its assumptions would need to change for the 100 Consolidated Statement of Changes in Equity calculated recoverable amounts based on value in use, to fall below the carrying value of goodwill of the CGU. To require an 101 Accounting Policies of the Group impairment in the Group financial statements, one of the following would be required: 106 Notes to the Consolidated — estimates of cash flows during the three year period, for which management estimates have been used, would need to reduce Financial Statements by 30%; or 141 Company Balance Sheet — estimates of long-term growth rates would need to reduce from a growth rate of 2.7% to a long-term decline of more than 3.0%; or 142 Accounting Policies of — the discount rate applied to future cash flows would need to increase to more than 16%. the Company 144 Notes to the Company Management has concluded that no reasonably foreseeable change in the key assumptions used in the impairment model would Financial Statements result in a significant impairment charge being recorded in the financial statements. 149 Principal Subsidiary and Associated Undertakings 150 Five Year Summary 9. Property, plant and equipment Land and Fixtures and Land and Fixtures and 151 Shareholder Information buildings equipment Total buildings equipment Total 2013 2013 2013 2012 2012 2012 $m $m $m $m $m $m Cost or valuation Beginning of year 634.0 443.3 1,077.3 620.4 425.1 1,045.5 Exchange adjustments 1.4 3.0 4.4 2.1 5.3 7.4 Transfers from/(to) other asset categories 1.2 (7.1) (5.9) (0.4) (6.1) (6.5) Acquisition of businesses 38.8 3.2 42.0 1.8 4.6 6.4 Additions 36.4 37.3 73.7 19.4 29.3 48.7 Disposals – (5.0) (5.0) – (2.4) (2.4) Asset write downs (1.7) (7.5) (9.2) (9.3) (12.5) (21.8) Transfer to assets held for sale (4.5) (42.8) (47.3) – – – End of year 705.6 424.4 1,130.0 634.0 443.3 1,077.3

Accumulated depreciation and impairment Beginning of year (285.2) (280.6) (565.8) (263.4) (264.7) (528.1) Exchange adjustments (0.1) (1.7) (1.8) (0.8) (3.3) (4.1) Transfers (from)/to other asset categories (0.3) 1.2 0.9 – 2.4 2.4 Depreciation charge for the year (28.2) (25.7) (53.9) (27.0) (25.7) (52.7) Disposals – 4.0 4.0 – 2.0 2.0 Asset write downs 1.6 6.7 8.3 6.0 8.7 14.7 Transfer to assets held for sale 2.6 32.7 35.3 – – – End of year (309.6) (263.4) (573.0) (285.2) (280.6) (565.8)

Carrying amount End of year 396.0 161.0 557.0 348.8 162.7 511.5 Beginning of year 348.8 162.7 511.5 357.0 160.4 517.4

2013 2012 $m $m Capital commitments Capital expenditure contracted for but not provided for 13.7 49.5

The carrying amount of the Group’s land and buildings, and fixtures and equipment includes an amount of $5.4 million (2012: $5.8 million) and $0.3 million (2012: $0.8 million) respectively in respect of assets held under finance leases. Where assets have been written down or impaired, the recoverable amount has been determined by reference to its value in use, estimated using the forecast cash flows over the remaining life of the asset and discounted using a rate of 12.0% (2012: 10.8%), which approximates to the Group’s pre-tax weighted average cost of capital. 114 The amounts disclosed above for asset write downs are attributable to $0.7 million (2012: $3.7 million) in Flight Support, $0.2 million (2012: $3.1 million) in Aftermarket Services and $nil (2012: $0.3 million) in unallocated corporate.

BBA complete.indb 114 12/03/2014 12:45 10. Interests in associates and joint ventures Consolidated Financial Statements Notes to the Consolidated 2013 2012 Financial Statements Interests in associates $m $m Cost of investment in associates 1.4 1.4 Share of post-acquisition profit, net of dividends received 3.6 3.6 Group share of net assets of associates 5.0 5.0

The investment in associates relates to a number of small investments within the Flight Support segment (note 26).

2013 2012 Aggregated amounts relating to associates $m $m Total assets 99.4 58.7 Total liabilities (91.7) (51.0) Net assets 7.7 7.7

2013 2012 $m $m Revenue 527.1 514.5 Profit for the year 6.2 5.1 Group’s share of profit for the year 1.3 1.6

A list of significant investments in associates, including name, country of incorporation and proportion of ownership interest is given in the Principal Subsidiary and Associated Undertakings note on page 149.

2013 2012 Interests in joint ventures $m $m Cost of investment in joint ventures 3.0 – Share of post acquisition profit, net of dividends received 0.1 – Group share of net assets of joint ventures 3.1 –

Summary of aggregate financial results and position of joint ventures: 2013 2012 $m $m Current assets 1.7 – Non-current assets 4.0 – Total assets 5.7 –

Current liabilities (1.5) – Total liabilities (1.5) – Net assets 4.2 –

Total revenues 1.9 – Total profit for the year 0.1 –

During the year, the Group entered into a joint venture agreement in respect of an investment in Signature Canada FBO Services Inc, a company incorporated in Canada, at a cost of $3.0 million. The Group holds a 75% ownership interest and a 50% share of the voting power.

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BBA complete.indb 115 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 11. Inventories 2013 2012 93 Independent Auditor’s Report to $m $m the members of BBA Aviation plc 96 Consolidated Income Statement Raw materials 115.0 173.3 97 Consolidated Statement of Work-in-progress 22.6 36.7 Comprehensive Income Finished goods 62.1 51.8 98 Consolidated Balance Sheet 199.7 261.8 99 Consolidated Cash Flow Statement As at 31 December 2013, included within assets classified as held for sale is a further $49.6 million (2012: $nil) of inventories (see note 25). 100 Consolidated Statement of Changes in Equity During the year, the directors reviewed the methodology for assessing the excess and obsolete inventory provisions within Dallas 101 Accounting Policies of the Group Automotive Incorporated to ensure consistency of application. As a result of this review, there was a reduction of $5.2 million in the 106 Notes to the Consolidated Financial Statements inventory provision. The value of inventories written down in the year was $0.1 million (2012: $nil). 141 Company Balance Sheet 142 Accounting Policies of 12. Other financial assets the Company 2013 2012 Trade and other receivables Note $m $m 144 Notes to the Company Financial Statements Amounts due within one year 149 Principal Subsidiary and Trade receivables 246.2 260.8 Associated Undertakings Other receivables, prepayments and accrued income 102.1 114.2 150 Five Year Summary Derivative financial instruments 17 4.5 2.3 151 Shareholder Information Trade and other receivables due within one year 352.8 377.3

Amounts due after one year Trade and other receivables 4.0 22.5 Available for sale investments 8.5 3.2 Derivative financial instruments 17 9.1 28.0 Trade and other receivables due after one year 21.6 53.7 374.4 431.0

Included within assets classified as held for sale is a further $16.1 million (2012: $nil) of trade and other receivables (see note 25).

Trade receivables An allowance has been made for estimated irrecoverable amounts from the sale of goods and services of $4.5 million (2012: $7.8 million). This allowance has been determined by reference to past default experience and current expectations.

Included in the Group’s trade receivables balances are debtors with a carrying amount of $45.6 million (2012: $50.7 million) which are past due at the reporting date, for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these overdue receivables is 74 days (2012: 78 days).

2013 2012 $m $m Ageing of past due but not impaired receivables 30 – 60 days 23.0 25.4 60 – 90 days 9.1 7.6 90 – 120 days 5.5 5.0 over 120 days 8.0 12.7 45.6 50.7

2013 2012 $m $m Movement in the allowance for doubtful debts Beginning of year (7.8) (6.2) Amounts written off as uncollectable 3.0 0.3 Charged in the year (0.8) (1.9) Transfer to assets classified as held for sale 1.1 – End of year (4.5) (7.8)

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BBA complete.indb 116 12/03/2014 12:45 12. Other financial assets – continued Consolidated Financial Statements Notes to the Consolidated In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from Financial Statements the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. The directors consider that the carrying amount of trade and other receivables approximates their fair value. 2013 2012 $m $m Ageing of impaired trade receivables 60 – 90 days 1.4 1.9 90 – 120 days 0.8 1.6 over 120 days 2.3 4.3 4.5 7.8

Available for sale investments Available for sale investments are carried at fair value and reflect the Group’s 1.45% stake in Líder Táxi Aéreo S.A. – Air Brazil (2012: 15% stake in Líder Signature S.A.). On 29 November 2013 the Group disposed of its 15% stake in Líder Signature S.A. in return for a 1.45% stake in Líder Táxi Aéreo S.A. – Air Brazil. See note 2.

2013 2012 Cash and cash equivalents $m $m Cash at bank and in hand 148.1 128.1 Short-term bank deposits 14.0 23.0 Cash and cash equivalents 162.1 151.1

Cash and cash equivalents classified as held for sale (note 25) 2.9 – Cash and cash equivalents in the statement of cash flows 165.0 151.1

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

Credit risk The Group’s principal financial assets are bank balances and cash, trade and other receivables, investments and derivative financial instruments.

The Group’s policy on credit risk relating to cash and derivative financial instruments is disclosed in note 17.

The Group’s credit risk is primarily attributable to its trade and finance lease receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction of the cash flows.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

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BBA complete.indb 117 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 13. Trade and other payables 2013 2012 93 Independent Auditor’s Report to Note $m $m the members of BBA Aviation plc 96 Consolidated Income Statement Amounts due within one year 97 Consolidated Statement of Trade payables 226.4 215.9 Comprehensive Income Other taxation and social security 11.6 13.0 98 Consolidated Balance Sheet Other payables 88.0 69.8 99 Consolidated Cash Flow Accruals and deferred income 116.0 146.0 Statement Derivative financial instruments 17 5.2 26.4 100 Consolidated Statement of Changes in Equity 447.2 471.1 101 Accounting Policies of the Group 106 Notes to the Consolidated Amounts due after one year Financial Statements Trade and other payables 17.6 16.5 141 Company Balance Sheet Derivative financial instruments 17 8.3 7.0 142 Accounting Policies of 25.9 23.5 the Company 144 Notes to the Company Financial Statements Total trade and other payables 473.1 494.6 149 Principal Subsidiary and Associated Undertakings As at 31 December 2013, included within liabilities associated with assets classified as held for sale is a further $13.2 million (2012: $nil) 150 Five Year Summary of trade and other payables. 151 Shareholder Information The directors consider that the carrying amount of trade and other payables approximates their fair value.

The average age of trade creditors was 47 days (2012: 45 days).

14. Obligations under finance leases Present value of Minimum lease minimum lease payments payments 2013 2012 2013 2012 $m $m $m $m Amounts payable under finance leases Within one year 1.4 1.7 1.4 1.5 In the second to fifth years inclusive – 1.4 – 1.4 1.4 3.1 1.4 2.9 Less: future finance charges (0.1) (0.3) – – Present value of lease obligations 1.3 2.8 1.4 2.9

Less: Amount due for settlement within 12 months (shown under current liabilities) (1.4) (1.5) Amount due for settlement after 12 months – 1.4

It is the Group’s policy to lease certain of its land and buildings, and fixtures and equipment under finance leases. The average lease term is five years for equipment and 20 years for FBO leasehold improvements. For the year ended 31 December 2013, the average effective borrowing rate of the Group was 13.9% (2012: 11.1%). Interest rates are fixed at the contract date or vary based on prevailing interest rates.

All of the Group’s finance lease obligations are denominated in US dollars.

The fair value of the Group’s lease obligations approximates their carrying amount.

The Group’s obligations under finance leases are secured by the lessors’ charges over the leased assets.

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BBA complete.indb 118 12/03/2014 12:45 15. Operating lease arrangements Consolidated Financial Statements Notes to the Consolidated The Group as lessee Financial Statements 2013 2012 $m $m Minimum lease payments under operating leases recognised as an expense in the year 92.2 82.9

At the balance sheet date, the Group has outstanding commitments under non-cancellable operating leases, which fall due as follows: 2013 2012 $m $m Within one year 103.8 102.5 In the second to fifth years inclusive 296.0 325.8 After five years 686.9 680.3 1,086.7 1,108.6

Operating lease payments represent amounts payable by the Group for certain of its office properties, plants, FBOs, and equipment. Leases are negotiated for an average term of seven years for office properties, six years for plant and warehouses, 23 years for FBOs, and four years for equipment. Rentals are generally fixed or adjusted based on inflation.

The total future minimum sub-lease payments expected to be received under non-cancellable sub-leases at 31 December 2013 were $68.9 million (2012: $64.4 million).

16. Borrowings 2013 2012 $m $m Bank overdrafts 17.8 11.2 Bank loans 318.0 250.0 Loan notes 306.1 326.9 Other loans 3.8 3.7 645.7 591.8

The borrowings are repayable as follows: On demand or within one year 18.2 11.2 In the second year – 200.4 In the third to fifth years inclusive 443.1 50.0 After five years 184.4 330.2 645.7 591.8 Less: Amount due for settlement within 12 months (shown within current liabilities) (18.2) (11.2) Amount due for settlement after 12 months 627.5 580.6

As at 31 December 2013, included within liabilities associated with assets classified as held for sale is a further $2.5 million (2012: $nil) of bank overdrafts repayable on demand or within one year (see note 25).

Loan notes have been accounted for at fair value through profit and loss as the fair value interest rate risk has been hedged from fixed to floating interest rates. Under IFRS hedge accounting rules the fair value movement on the loan notes is booked to interest and is offset by the fair value movement on the underlying interest rate swaps.

The Group includes the fair value gain on the interest rate swaps in relation to the loan notes within net debt so that the net effect is to show the $300 million US private placement at face value and to reflect the fact that the liabilities will be in place until maturity. More information is included in note 17.

All other borrowings are held at amortised cost.

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BBA complete.indb 119 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 16. Borrowings – continued 93 Independent Auditor’s Report to The carrying amounts of the Group’s borrowings are denominated in the following currencies: the members of BBA Aviation plc Sterling US dollar Euro Other Total 96 Consolidated Income Statement $m $m $m $m $m 97 Consolidated Statement of Comprehensive Income 31 December 2013 98 Consolidated Balance Sheet Bank overdrafts 12.6 4.0 0.2 1.0 17.8 Bank loans – 318.0 – – 318.0 99 Consolidated Cash Flow Statement Loan notes – 306.1 – – 306.1 100 Consolidated Statement of Other loans 0.3 3.0 – 0.5 3.8 Changes in Equity 12.9 631.1 0.2 1.5 645.7 101 Accounting Policies of the Group 106 Notes to the Consolidated 31 December 2012 Financial Statements Bank overdrafts 8.0 0.9 1.4 0.9 11.2 141 Company Balance Sheet Bank loans – 250.0 – – 250.0 142 Accounting Policies of the Company Loan notes – 326.9 – – 326.9 144 Notes to the Company Other loans 0.3 3.0 – 0.4 3.7 Financial Statements 8.3 580.8 1.4 1.3 591.8 149 Principal Subsidiary and Associated Undertakings The average floating interest rates on borrowings are as follows: 150 Five Year Summary 2013 2012 151 Shareholder Information Sterling 1.5% 1.5% US dollar 1.8% 1.9% Euros 0.4% 0.7%

The Group’s borrowings are funded through a combination of fixed and floating rate debt. The floating rate debt exposes the Group to cash flow interest rate risk whilst the fixed rate US dollar private placement debt exposes the Group to changes in the fair value of fixed rate debt due to changes in interest rates. Interest rate risk is managed by the combination of fixed rate debt and interest rate swaps in accordance with pre-agreed policies and authority limits. As at 31 December 2013, 42% of the Group’s borrowings are fixed at a weighted average interest rate of 3.43% for a weighted average period of two years.

Bank overdrafts are repayable on demand. Bank loans, loan notes and other loans are unsecured.

At 31 December 2013, the Group had a $750 million (2012: $750 million) multicurrency revolving credit facility dated 21 April 2011 with a split maturity, of which $250 million is due to expire in April 2014, and $500 million is due to expire in April 2016. As at 31 December 2013, the Group had available $432.0 million (2012: $500.0 million) of undrawn facilities.

In addition, the Group has issued $300 million of US private placement (“USPP”) senior notes dated 18 May 2011 with maturities of seven, ten and 12 years.

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BBA complete.indb 120 12/03/2014 12:45 17. Financial instruments Consolidated Financial Statements Notes to the Consolidated Assets and associated liabilities classified as held for sale (see note 25) have been included within the data disclosed in note 17 as Financial Statements this note provides information regarding the financial risk of the Group. In particular, cash and cash equivalents of $2.9 million and borrowings of $2.5 million which are classified as held for sale have been included within the relevant disclosures in this note.

Categories of financial instruments The carrying values of the financial instruments of the Group are analysed below: 2013 2012 Carrying Carrying value value $m $m Financial assets Fair value through profit or loss – foreign exchange contractsa 1.5 0.4 Derivative instruments held in fair value hedgesb 5.5 27.2 Derivative instruments held in cash flow hedges 6.6 2.7 Available for sale investments 8.5 3.2 Trade and other receivables (including cash and cash equivalents)c, d 434.1 441.1 456.2 474.6

Financial liabilities Fair value through profit or loss – foreign exchange contractsa (4.4) (1.0) Derivative instruments held in fair value hedgesb (5.6) – Derivative instruments held in cash flow hedges (3.5) (10.6) Derivative instruments held in net investment hedges – (21.8) Borrowings and other payablesd (919.4) (843.1) (932.9) (876.5)

a The foreign exchange contracts disclosed as fair value through profit or loss are not designated in a formal hedging relationship and are used to hedge foreign currency flows through the BBA Aviation plc company bank accounts to ensure that the Group is not exposed to foreign exchange risk through the management of its international cash management structure. b Derivative instruments held in fair value hedges are designated in formal hedging relationships and are used to hedge the change in fair value of fixed rate US dollar borrowings. c Recoveries from third parties in respect of environmental and other liabilities totalling $4.4 million (2012: $21.2 million) are included within trade and other receivables. d The carrying value of trade and other receivables, and other payables approximates their fair value.

Derivative financial instruments The fair values and notional amounts of derivative financial instruments are shown below. The fair value on initial recognition is the transaction price unless part of the consideration given or received is for something other than the instrument itself. The fair value of derivative financial instruments is subsequently calculated using discounted cash flow techniques or other appropriate pricing models. All valuation techniques take into account assumptions based upon available market data at the balance sheet date. The notional amounts are based on the contractual gross amounts at the balance sheet date. The fair values of available for sale investments and the derivative financial instruments are categorised within Level 2 of the fair value hierarchy on the basis that their fair value has been calculated using inputs that are observable in active markets which are related to the individual asset or liability. The Group does not have any derivative financial instruments which would be categorised as either Level 1 or 3 of the fair value hierarchy.

Derivative financial assets 2013 2012 Notional Notional amount Fair value amount Fair value $m $m $m $m Cash flow hedges Interest rate swaps (310.0) 1.5 –– Foreign exchange forward contracts (104.1) 5.1 (97.9) 2.7

Fair value hedges Interest rate swaps (120.0) 5.5 (300.0) 27.2

Derivatives not in a formal hedge relationship Foreign exchange forward contracts (51.6) 1.5 156.6 0.4 (585.7) 13.6 (241.3) 30.3

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BBA complete.indb 121 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 17. Financial instruments – continued 93 Independent Auditor’s Report to Derivative financial liabilities measured at fair value 2013 2012 the members of BBA Aviation plc Notional Notional 96 Consolidated Income Statement amount Fair value amount Fair value $m $m $m $m 97 Consolidated Statement of Comprehensive Income Cash flow hedges 98 Consolidated Balance Sheet Interest rate swaps (345.0) (3.3) (580.0) (10.5) 99 Consolidated Cash Flow Foreign exchange forward contracts 11.5 (0.2) (8.0) (0.1) Statement 100 Consolidated Statement of Changes in Equity Fair value hedges Interest rate swaps (180.0) (5.6) – – 101 Accounting Policies of the Group 106 Notes to the Consolidated Financial Statements Net investment hedges 141 Company Balance Sheet Cross currency swaps – – (125.0) (21.8) 142 Accounting Policies of the Company Derivatives not in a formal hedge relationship 144 Notes to the Company Foreign exchange forward contracts 349.0 (4.4) 111.7 (1.0) Financial Statements (164.5) (13.5) (601.3) (33.4) 149 Principal Subsidiary and Associated Undertakings Adjustments relating to the credit risk of BBA Aviation plc and its counterparties, as defined within IFRS 13, are immaterial in the current 150 Five Year Summary and prior periods. 151 Shareholder Information The maturity of derivative financial instruments is as follows: 2013 2012 Asset Liability Asset Liability fair value fair value fair value fair value $m $m $m $m Current Less than one year 4.5 (5.2) 2.3 (26.4) Total current 4.5 (5.2) 2.3 (26.4)

Non-current One to two years 1.6 (0.4) 0.6 (3.6) Two to three years 0.3 (0.7) 0.2 (0.4) Three to four years 1.0 (1.6) – (0.6) Four to five years 6.2 – – (2.4) More than five years – (5.6) 27.2 – Total non-current 9.1 (8.3) 28.0 (7.0) 13.6 (13.5) 30.3 (33.4)

Collateral As part of the Group’s management of its insurable risks, a proportion of this risk is managed through self insurance programmes operated by its captive insurance company, BBA Aviation Insurances Limited, based in the Isle of Man. This company is a wholly owned subsidiary of the Group and premiums paid are held to meet future claims. The cash balances held by the company are reported on the balance sheet within cash and cash equivalents. As is usual practice for captive insurance companies some of this cash is used as collateral against contingent liabilities (standby letters of credit) that have been provided to certain external insurance companies.

The table below details the contractual amount of the cash balances that have been pledged as collateral for these contingent liabilities, all of which are current: 2013 2012 US dollar Sterling Total US dollar Sterling Total $m $m $m $m $m $m BBA Aviation Insurances Limited 13.0 0.9 13.9 13.9 1.6 15.5

The standby letters of credit have been issued via bank facilities that BBA Aviation Insurances Limited has in place. The amount of these facilities corresponds to the amounts pledged as detailed in the table above. The amounts pledged are usually for less than one year, and are secured by a legal charge to the bank providing the letters of credit over the cash balances of BBA Aviation Insurances Limited corresponding to the amount of the standby letters of credit.

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BBA complete.indb 122 12/03/2014 12:45 17. Financial instruments – continued Consolidated Financial Statements Notes to the Consolidated Financial risk factors Financial Statements The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Overall the Group’s risk management policies and procedures focus on the uncertainty of financial markets and seek to manage and minimise potential financial risks through the use of derivative financial instruments. The Group does not undertake speculative transactions for which there is no underlying financial exposure. Risk management is carried out by a central treasury department under policies approved by the Board of Directors of BBA Aviation plc. This department identifies, evaluates and hedges financial risks in close co-operation with Group subsidiary companies. The treasury policies cover specific areas such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and the investment of excess liquidity. These policies are outlined on page 57.

Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt to equity balance. The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the parent comprising capital, reserves and retained earnings. The Group’s policy is to borrow centrally to meet anticipated funding requirements. These borrowings, together with cash generated from the operations, are on-lent or contributed as equity to subsidiaries at market-based interest rates and on commercial terms and conditions. The Group is subject to two financial covenant requirements within its borrowing facilities: maximum net debt to EBITDA of 3.5 times and minimum net interest cover of 3.0 times (based on EBITDA). The Group complied with these covenants during the year.

Market risk Market risk is the risk of adverse financial impact due to changes in fair values or future cash flows of financial instruments from fluctuations in foreign currency exchange rates and interest rates. The Group has well defined policies for the management of these risks which includes the use of derivative financial instruments.

(i) Foreign exchange risk The Group has significant overseas businesses whose revenues, cash flows, assets and liabilities are mainly denominated in the currency in which the operations are located. The Group’s policy in relation to foreign exchange translation risk is not to hedge the income statement since such hedges only have a temporary effect. In relation to the balance sheet, the Group seeks to denominate the currency of its borrowings in US dollars in order to match the currency of its cash flows, earnings and assets which are principally denominated in US dollars.

As at 31 December 2013, the majority of the Group’s net borrowings were denominated in US dollars as set out below: 2013 US dollar Euros Sterling Other Total $m $m $m $m $m Cash and cash equivalents 122.4 11.7 23.3 7.6 165.0 Borrowings and finance leases (632.4) (1.0) (14.7) (1.5) (649.6) (510.0) 10.7 8.6 6.1 (484.6)

2012 US dollar Euros Sterling Other Total $m $m $m $m $m Cash and cash equivalents 117.0 8.5 19.7 5.9 151.1 Borrowings and finance leases (583.7) (1.4) (8.3) (1.3) (594.7) (466.7) 7.1 11.4 4.6 (443.6)

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BBA complete.indb 123 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 17. Financial instruments – continued 93 Independent Auditor’s Report to As detailed in note 16, the US dollar private placement loan notes included within borrowings and finance leases in the tables above the members of BBA Aviation plc have been accounted for at fair value through profit or loss as the fair value interest rate risk has been hedged from fixed to floating 96 Consolidated Income Statement interest rates. 97 Consolidated Statement of Within the Group’s definition of net debt the US private placement is included at its face value of $300 million reflecting the fact Comprehensive Income that the liabilities will be in place until maturity. This is $6.1 million (2012: $27.2 million) lower than the carrying value. 98 Consolidated Balance Sheet At the end of 2013 the Group had outstanding $nil (2012: $125 million) of cross-currency swaps. The fair value of currency 99 Consolidated Cash Flow Statement derivatives that are designated and effective as net investment hedges at 31 December 2013 amounting to a payable/receivable of $nil 100 Consolidated Statement of (2012: payable $21.8 million) has been recognised within gains on net investment hedges in the statement of comprehensive income. Changes in Equity The Group manages its transactional foreign currency risk by hedging significant currency exposures in accordance with foreign 101 Accounting Policies of the Group exchange policies that Group subsidiaries have in place which have been pre-agreed between Group Treasury and the subsidiary. 106 Notes to the Consolidated Each foreign exchange policy is individually tailored to the foreign exchange exposures within the relevant subsidiary. Transaction Financial Statements currency risk is managed through the use of spot and forward foreign exchange contracts. All committed exposures are fully hedged 141 Company Balance Sheet 100% and where significant foreign currency exposures exist then generally a percentage of the projected foreign currency flows are 142 Accounting Policies of covered depending on the certainty of these cash flows. the Company The transaction foreign exchange risk is measured by each subsidiary submitting monthly reports to Group Treasury which 144 Notes to the Company Financial Statements detail the foreign currency exposure reported on the balance sheet as committed exposures and, for those subsidiaries with significant foreign exchange transaction exposures, an additional report detailing the future projected foreign currency cash flows 149 Principal Subsidiary and Associated Undertakings over the life of the policy. The pre-determined policy margin is shown against the projected exposures to determine whether there 150 Five Year Summary is a net exposure which needs to be hedged. If this is the case, then foreign exchange spot or forward contract(s) will be undertaken 151 Shareholder Information by Group Treasury on behalf of the relevant subsidiary with the Group’s relationship banks.

2013 US dollar Euros Total $m $m $m Net foreign exchange transaction cash flow exposure 103.7 3.9 107.6 Derivative effect – foreign exchange contracts spot/forwards (98.8) (2.9) (101.7) Net asset position excluding intercompany debt post hedging effect 4.9 1.0 5.9

2012 US dollar Euros Total $m $m $m Net foreign exchange transaction cash flow exposure 116.7 3.3 120.0 Derivative effect – foreign exchange contracts spot/forwards (115.9) (3.8) (119.7) Net asset position excluding intercompany debt post hedging effect 0.8 (0.5) 0.3

The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to $5.3 million (2012: $2.7 million) has been recognised in other comprehensive income. A gain of $2.1 million (2012: gain of $0.8 million) has been transferred to the income statement. Foreign exchange contracts that are not designated as cash flow hedges are used to hedge foreign currency flows through the BBA Aviation plc company bank accounts and to ensure that the Group is not exposed to foreign exchange risk through the management of its international cash pooling structure. Changes in the fair value of foreign exchange contracts which have not been designated as cash flow hedges have resulted in a credit of $4.7 million (2012: a charge of $10.7 million) to administrative expenses in the income statement. The net impact on the Group’s result for the period is immaterial, since the balances which these contracts relate to have had a similar but opposite effect on administrative expenses.

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BBA complete.indb 124 12/03/2014 12:45 17. Financial instruments – continued Consolidated Financial Statements Notes to the Consolidated (ii) Interest rate risk Financial Statements The Group’s borrowings are funded through a combination of bank debt and capital markets borrowings. The Group’s bank debt is funded through floating rate debt which exposes the Group to cash flow interest rate risk. The Group’s capital markets borrowings are financed through US private placement fixed rate debt which exposes the Group to changes in the fair value of the fixed rate debt due to changes in interest rates. During 2011 the Board reviewed and updated the Group’s interest rate risk policy addressing the portion of its debt obligations, which should be fixed through the use of fixed rate debt and/or interest rate swaps, in order to protect the interest cover covenant.

The fixed/floating interest rate mix within net debt, and other financial instruments is as follows: 2013 Cash and Book Fair cash value of value of equivalents borrowings borrowings $m $m $m Fixed interest rate (adjusted for interest rate hedging) Less than one year – (1.0) (1.0) Between two and five years – (270.0) (271.8) Total fixed interest rate (adjusted for interest rate hedging) – (271.0) (272.8)

Floating interest rate 165.0 (378.6) (378.5) Total interest bearing assets/(liabilities) within net debt 165.0 (649.6) (651.3)

2012 Cash and Book Fair cash value of value of equivalents borrowings borrowings $m $m $m Fixed interest rate (adjusted for interest rate hedging) Less than one year – (1.0) (1.0) Between two and five years – (251.0) (261.5) Total fixed interest rate (adjusted for interest rate hedging) – (252.0) (262.5)

Floating interest rate 151.1 (342.7) (342.7) Derivative asset – fair value of interest rate swaps on fixed interest rate borrowings – 27.2 27.2 Total interest bearing assets/(liabilities) within net debt 151.1 (567.5) (578.0)

Other interest bearing liabilities – cross currency swaps – (21.8) (21.8) Total 151.1 (589.3) (599.8)

The Group has designated $270 million of interest rate swaps as cash flow hedges and the fair value loss of $1.8 million (2012: loss $10.5 million) has been recognised in other comprehensive income. A charge of $6.1 million (2012: charge $10.3 million) has been booked against hedged interest payments made in the period. The Group has designated $300 million interest rate swaps as fair value hedges and no fair value gain or loss (2012: gain of $27.2 million) has been booked to the income statement. This amount is offset against the change in fair value on the fixed rate debt, which has also been booked to the income statement, so that the net impact is immaterial.

Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. As part of the Group’s operations, cash management and risk management activities, the Group is exposed to counterparty risk arising on the financial assets held by the Group and the credit risk on outstanding derivative financial instruments. During the year the Group restructured one interest rate swap with a notional value of $75 million, resulting in a cash receipt of $7.3 million. In 2012, two cross-currency swaps of €50 million and $75 million were closed out at a cash cost of $4.4 million and $6.5 million respectively. In addition, in 2012 the Group closed out two interest rate swaps totalling $100 million at a cost of $3.8 million.

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BBA complete.indb 125 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 17. Financial instruments – continued 93 Independent Auditor’s Report to Treasury related credit risk the members of BBA Aviation plc The Group aims to reduce counterparty risk by dealing with counterparties with investment grade ratings, as measured by financial 96 Consolidated Income Statement credit rating agencies. All treasury related activity is concentrated with relationship banks that provide unsecured committed facilities 97 Consolidated Statement of to the Group. Across the subsidiaries, wherever possible and where services can be provided efficiently and cost effectively, bank Comprehensive Income accounts, surplus cash and any hedging activity are concentrated and undertaken with relationship banks. 98 Consolidated Balance Sheet Each counterparty that the Group uses for derivatives, bank account activity and the investment of surplus cash is assigned a 99 Consolidated Cash Flow Statement maximum credit limit dependent upon the counterparty’s credit rating. This limit gives a maximum permitted amount of cash and derivatives that can be held or undertaken with each counterparty. Deposits are generally for short-term maturity of less than three 100 Consolidated Statement of Changes in Equity months. 101 Accounting Policies of the Group As at 31 December 2013 and 31 December 2012, the Group had a number of exposures to individual counterparties. These 106 Notes to the Consolidated exposures are continually monitored and reported and no individual exposure is considered significant in the ordinary course of Financial Statements treasury management activity. No significant losses are expected to arise from non-performance by these counterparties. 141 Company Balance Sheet 142 Accounting Policies of Commercial related credit risk the Company The Group’s exposure to commercial related credit risk is primarily attributable to its trade and finance lease receivables and the 144 Notes to the Company amounts presented in the balance sheet are net of allowances for doubtful receivables. Sales to customers are settled by a number of Financial Statements different ways including cash, credit cards, cheques and electronic payment methods. A customer or potential customer is assessed 149 Principal Subsidiary and Associated Undertakings on a case-by-case basis to determine whether credit terms will be provided. The Group does not expect any significant losses of 150 Five Year Summary receivables that have not been provided for, as shown in note 12. 151 Shareholder Information Liquidity risk The Group manages its liquidity requirements through the use of short-term and long-term cash flow forecasts. In addition to strong cash generation in the businesses, the Group maintains unsecured committed borrowing facilities from a range of banks to mitigate this risk further. Headroom on the Group’s facilities is regularly evaluated and consistently monitored to ensure that the Group has adequate headroom and liquidity. The Group’s committed facilities are a $250 million revolving credit facility maturing in 2014 and a $500 million revolving credit facility maturing in 2016. The following table provides an analysis of the contractual undiscounted cash flows payable under the financial liabilities as at the balance sheet date: 2013 Non- US$ derivative Derivative private Bank Finance Other Trade financial financial placement loans leases loans creditors liabilities liabilities Total $m $m $m $m $m $m $m $m Due within one year 17.0 27.8 1.5 0.6 230.5 277.4 2.6 280.0 Due between one and two years 17.0 7.2 – 0.2 17.6 42.0 (1.7) 40.3 Due between two and three years 17.0 320.2 – 0.2 – 337.4 (1.4) 336.0 Due between three and four years 17.0 – – 0.2 – 17.2 0.6 17.8 Due between four and five years 133.1 – – 0.2 – 133.3 2.4 135.7 Due in more than five years 212.6 – – 0.2 – 212.8 12.7 225.5 Total 413.7 355.2 1.5 1.6 248.1 1,020.1 15.2 1,035.3

2012 Non- US$ derivative Derivative private Bank Finance Other Trade financial financial placement loans leases loans creditors liabilities liabilities Total $m $m $m $m $m $m $m $m Due within one year 17.0 16.0 1.8 0.2 215.9 250.9 33.6 284.5 Due between one and two years 17.0 203.6 1.5 0.6 5.5 228.2 2.1 230.3 Due between two and three years 17.0 1.0 – 0.2 – 18.2 1.3 19.5 Due between three and four years 17.0 50.8 – 0.2 – 68.0 0.5 68.5 Due between four and five years 17.0 – – 0.2 – 17.2 – 17.2 Due in more than five years 368.0 – – 3.5 11.0 382.5 – 382.5 Total 453.0 271.4 3.3 4.9 232.4 965.0 37.5 1,002.5 Prior year comparative data has been adjusted to reflect net inflows and outflows at each payment date in respect of financial derivatives.

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BBA complete.indb 126 12/03/2014 12:45 17. Financial instruments – continued Consolidated Financial Statements Notes to the Consolidated The maturity profile of the Group’s financial derivatives using undiscounted cash flows is as follows: Financial Statements 2013 2012 Payable Receivable Payable Receivable $m $m $m $m Due within one year (487.3) 490.6 (510.4) 483.8 Due between one and two years (52.4) 57.2 (42.4) 48.4 Due between two and three years (25.6) 28.8 (22.3) 27.7 Due between three and four years (25.1) 25.8 (14.3) 18.7 Due between four and five years (20.3) 19.4 (14.9) 18.2 Due in more than five years (46.1) 33.4 (47.1) 46.9 Total (656.8) 655.2 (651.4) 643.7

Prior year comparative data has been adjusted to reflect gross inflows and outflows at each payment date in respect of financial derivatives.

Sensitivity analysis as at 31 December 2013 Financial instruments affected by market risk are derivative financial instruments. The following analysis is intended to illustrate the sensitivity to changes in foreign exchange rates and interest rates. The sensitivity analysis has been prepared on the basis that the derivative portfolio and the proportion of derivatives hedging foreign exchange risk and interest rate risk are all constant and on the basis of hedge designations in place at 31 December 2013 and 2012 respectively. As a consequence, this sensitivity analysis relates to the position at these dates and is not representative of the year then ended. The following assumptions were made in calculating the sensitivity analysis: — the balance sheet sensitivity to interest rates relates only to cash flow interest rate derivatives. Cash and floating rate debt balances are carried at amortised cost and so their carrying value does not change as interest rates move. Fixed rate debt is also carried at amortised cost unless fair value interest rate hedges are entered into and hedge accounting achieved whereby the fixed rate debt is fair valued through the income statement to offset the movement in fair value of the swaps; — fair value interest rate swaps are assumed to be fully effective and therefore there is no impact on the income statement or balance sheet from changes in interest rates; — changes in the carrying value of derivative financial instruments designated as cash flow hedges or net investment hedges are assumed to be recorded fully within other comprehensive income; — the sensitivity of accrued interest to movements in interest rates is calculated on net floating rate exposures on debt, cash and derivative instruments; — changes in the carrying value of derivative financial instruments not in hedging relationships only affect the income statement; — all other changes in the carrying value of derivative financial instruments designated as hedges are fully effective with no impact on the income statement; — the floating rate leg of any swap or any floating rate debt is treated as not having any interest rate already set, therefore a change in the interest rate affects a full 12 month period for the accrued interest portion of the sensitivity calculations; — the sensitivity of foreign exchange rates only looks at the outstanding foreign exchange forward book and the currency bank account balances of the Company only as at the balance sheet date and assumes this is the position for a full 12 month period; — the sensitivity of a 10% movement in foreign exchange rates has been used due to the fact that historically rates can move by approximately 10% per annum; and — the sensitivity of a 1% movement in interest rates has been used due to the fact that historically floating US dollar interest rates have moved by on average 1% per annum.

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BBA complete.indb 127 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 17. Financial instruments – continued 93 Independent Auditor’s Report to Using the above assumptions the following table shows the illustrative effect on the income statement and within other the members of BBA Aviation plc comprehensive income that would result from reasonably possible movements in foreign currency exchange rates and interest rates, 96 Consolidated Income Statement before the effects of tax. 97 Consolidated Statement of 2013 2012 Comprehensive Income Other Other 98 Consolidated Balance Sheet compre- compre- 99 Consolidated Cash Flow Income hensive Income hensive Statement statement income statement income $m $m $m $m 100 Consolidated Statement of Changes in Equity £/$ FX rates – £ strengthens 10% – 8.3 – 20.8 101 Accounting Policies of the Group £/$ FX rates – £ weakens 10% – (10.1) – (25.4) 106 Notes to the Consolidated £/Euro FX rates – £ strengthens 10% – 0.1 – 0.2 Financial Statements £/Euro FX rates – £ weakens 10% – (0.2) – (0.3) 141 Company Balance Sheet 142 Accounting Policies of Interest rates +1.00% (3.3) 10.6 (3.3) 8.3 the Company Interest rates -1.00% 1.4 (11.1) N/A* (8.7) 144 Notes to the Company Financial Statements * Due to underlying interest rates being low the sensitivity of the income statement to interest rates reducing by 1% is not material for 2012. 149 Principal Subsidiary and Associated Undertakings The foreign exchange analysis in the sensitivity table above illustrates the impact of movements in foreign exchange rates on foreign 150 Five Year Summary currency transactional exposures and does not include the impact on the translation of the Group’s overseas income statement and 151 Shareholder Information balance sheet. The translation impact on profit before tax in the Group’s income statement from the movement in exchange rates is approximately $0.7 million for each 1.0¢ movement in the £/$ exchange rate.

18. Provisions Transfer to liabilities associated Exchange Reallocation with assets Beginning rate to other Charged Utilised Released classified as End of year adjustments receivables in year in year in year held for sale of year $m $m $m $m $m $m $m $m 31 December 2013 Restructuring provisions 0.8 ––– – (0.3) (0.5) – Discontinued operations 27.8 – (15.8) 5.9 (2.2) (0.3) – 15.4 Environmental provisions 2.5 – – 0.3 (0.9) – – 1.9 31.1 – (15.8) 6.2 (3.1) (0.6) (0.5) 17.3

31 December 2012 Restructuring provisions – – – 4.6 – (3.8) – 0.8 Discontinued operations 26.7 1.2 – 1.9 (2.0) – – 27.8 Environmental provisions 3.2 – – 0.6 (1.3) – – 2.5 29.9 1.2 – 7.1 (3.3) (3.8) – 31.1

Restructuring provisions represent costs provided in relation to commitments made at the balance sheet date for reorganisations which are expected to occur within one year of the balance sheet date. The charges to the restructuring provision in 2012 relate principally to rationalisation costs within the APPH business. Provisions in respect of discontinued operations represents a provision for environmental and other liabilities relating to businesses that have been disposed of by the Group in prior years. The provision of $15.4 million (2012: $27.8 million) is partially offset by expected recoveries from third parties of $4.4 million (2012: $21.2 million), which are included within trade and other receivables due after one year ($3.7 million) and trade and other receivables due within one year ($0.7 million) in note 12. Previously, in respect of recoveries from one particular third party, BBA paid the entire amount due to the claimant and was reimbursed by the third party in respect of the latter’s share. That third party now pays its share of the amount due, direct to the claimant. To reflect this, the associated provision and receivables balances each have been reduced by $15.8 million. As a result, the recoveries as at 31 December have decreased from $21.2 million in 2012 to $4.4 million in 2013. The discontinued operations provision also includes $3.7 million in respect of further potential claims which are described in note 26. The liabilities have an expected life of up to 40 years.

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BBA_ARA_2013_Financials_92-.indd 128 14/03/2014 18:19 18. Provisions – continued Consolidated Financial Statements Notes to the Consolidated Environmental provisions relate to environmental liabilities within businesses that have been acquired by the Group. The liabilities Financial Statements have an expected life of up to ten years (2012: five years). 2013 2012 Analysed as: $m $m Current liabilities 3.2 3.9 Non-current liabilities 14.1 27.2 17.3 31.1

19. Pensions and other post-retirement benefits The Group has adopted IAS 19: Employee Benefits (Revised 2011) (IAS 19R) for the year ended 31 December 2013, which introduces changes to the recognition, measurement, presentation and disclosure of post employment benefits. Comparative figures for the years ended 31 December 2012 and 31 December 2011 in the tables below have been restated. The Group operates a number of plans worldwide, of both the funded defined benefit type and the defined contribution type. The normal pension cost for the Group, including early retirement costs, is $13.5 million (2012: $11.4 million) of which $7.5 million (2012: $6.3 million) is in respect of schemes outside of the United Kingdom. This includes $9.1 million (2012: $8.0 million) relating to defined contribution schemes. The pension costs and defined benefit obligation are assessed in accordance with the advice of independent qualified actuaries. The Group’s main UK pension commitments are contained within a defined benefit scheme, the BBA Income and Protection Plan (IPP), with assets held in a separate trustee-administered fund. Contributions to the scheme are made and the pension cost is assessed using the projected unit method. As required by UK pension law, there is a board of Trustees that, together with the Group, is responsible for governance of the IPP. During 2008, the Trustees of the UK defined benefit plan purchased from Legal & General Group plc an annuity to match the liabilities associated with pensioner members. Since the initial buy-in, further tranches of annuities have been purchased periodically in respect of new pensioner liabilities, although there have been no new tranches purchased during 2013. The annuity is an investment of the UK plan, and all pension liabilities and responsibility for future pension payments remain with the plan. The income from the annuity matches the payments to be made to the pensioner members it covers and removes mortality risk in relation to those members which are the subject of the annuity purchase. The IPP was closed to new members in 2002. On 1 March 2010, the future service benefits provided by this plan were changed from a final salary to a career average re-valued earnings (CARE) basis. At the same time, benefits accrued in the IPP prior to 1 March 2010 were changed so that these now increase in line with inflation rather than future salary increases. The latest actuarial valuation of the IPP was carried out as at 31 March 2012. Following this valuation the Company agreed to pay additional contributions of £3.75 million ($6.01 million) per annum from March 2012 to December 2012, £4.75 million ($7.69 million) in 2013 and £6.80 million ($11.02 million) per annum from January 2014 to March 2017 to repair the funding shortfall of £30.4 million ($48.6 million) calculated at 31 March 2012. The split of the defined benefit obligation at 31 December 2013 is approximately 15% in respect of active members, 26% in respect of deferred members and 59% in respect of pensioner members. The weighted average duration of the IPP’s liabilities is approximately 16 years. The Group’s foreign pension schemes, which are all in North America, mainly relate to a funded defined benefit pension arrangement. There is also a post-employment medical plan and a deferred compensation plan. Pension costs have been calculated by independent qualified actuaries using the projected unit method and assumptions appropriate to the arrangements in place. In accordance with IAS 19R, and subject to materiality, the latest actuarial valuations of the Group’s defined benefit pension schemes and healthcare plan have been reviewed and updated as at 31 December 2013. The following weighted average financial assumptions have been adopted:

United Kingdom North America 2013 2012 2011 2013 2012 2011 Per annum (%) Discount rate 4.3 4.0 4.6 4.7 3.7 4.4 Rate of increase to pensionable salaries 3.7 3.1 3.3 4.0 4.0 4.0 Price inflation 3.2 2.6 2.8 2.3 2.3 2.3 Rate of increase to pensions in payment 3.1 2.6 2.7 2.3 2.3 2.3

IAS 19R requires that the discount rate used to discount the liability be determined by reference to market yields on high quality corporate bond investments at the reporting date. The currency and terms of these should be consistent with the currency and estimated term of the post-employment obligations. The discount rate for the IPP has been derived using a yield curve approach. The yield curve is based on the yield available on Sterling AA rated corporate bonds of a term similar to the liabilities. The RPI assumption for the IPP allows for the shape of the inflation spot curve and the duration of the Plan’s liabilities. A deduction of 30 basis points has been made to the breakeven inflation assumption to allow for an inflation risk premium.

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BBA complete.indb 129 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 19. Pensions and other post-retirement benefits – continued 93 Independent Auditor’s Report to For the IPP, the mortality assumptions are based on the recent actual mortality experience of members within the plan, and a best the members of BBA Aviation plc estimate view of future mortality improvements. The life expectancy assumptions applying to the IPP as at 31 December 2013 are 96 Consolidated Income Statement as follows: 97 Consolidated Statement of 2013 2012 2011 Comprehensive Income Male Female Male Female Male Female 98 Consolidated Balance Sheet 99 Consolidated Cash Flow Life expectancy for a current 65 year old (years) 22.1 23.7 21.9 22.8 21.8 22.8 Statement Life expectancy for a 65 year old in 15 years (years) 23.0 25.6 24.2 25.5 24.0 25.4 100 Consolidated Statement of Changes in Equity For the US post-employment medical plan, the immediate trend rate for medical benefits was 7.0%, which is assumed to reduce 101 Accounting Policies of the Group by 0.5% per annum to 5.0% from 2018 onwards. 106 Notes to the Consolidated Financial Statements The fair value of the assets and present value of defined benefit obligations of the schemes at each balance sheet date were: 141 Company Balance Sheet United Kingdom North America Total 142 Accounting Policies of the Company 2013 2012 2011 2013 2012 2011 2013 2012 2011 $m $m $m $m $m $m $m $m $m 144 Notes to the Company Financial Statements Assets 149 Principal Subsidiary and Associated Undertakings Equities 183.1 137.8 107.5 26.7 19.0 16.8 209.8 156.8 124.3 Government bonds 26.3 24.7 21.6 – – – 26.3 24.7 21.6 150 Five Year Summary Corporate bonds 67.8 64.2 49.3 15.5 17.8 14.9 83.3 82.0 64.2 151 Shareholder Information Property 39.0 38.4 42.5 – – – 39.0 38.4 42.5 Insurance policies 432.2 458.4 418.6 – – – 432.2 458.4 418.6 Cash 5.4 9.5 12.9 0.1 1.7 3.3 5.5 11.2 16.2 Total fair value of scheme assets1 753.8 733.0 652.4 42.3 38.5 35.0 796.1 771.5 687.4

Present value of defined benefit obligations (764.5) (763.5) (667.3) (65.6) (74.3) (69.3) (830.1) (837.8) (736.6) (10.7) (30.5) (14.9) (23.3) (35.8) (34.3) (34.0) (66.3) (49.2) Minimum funding liability2 (23.6) – (4.3) – – – (23.6) – (4.3) Liability recognised on the balance sheet (34.3) (30.5) (19.2) (23.3) (35.8) (34.3) (57.6) (66.3) (53.5)

1 In respect of the UK plan, at 31 December 2013, a total of $498.2 million of assets were not quoted on an active investment market (comprising $6.1 million of government bonds, $15.7 million of corporate bonds, $39.0 million of property, $432.2 million of insurance policies and $5.2 million of cash. All of the assets in respect of the US plans were quoted on an active investment market. 2 In accordance with IAS 19R and IFRIC 14 a minimum funding liability arises where the statutory funding requirements are such that future contributions in respect of past service will result in an unrecognisable surplus in the future.

The funding policy for the IPP and majority of the North American schemes is reviewed on a systematic basis in consultation with the independent scheme actuary in order to ensure that the funding contributions from sponsoring employers are appropriate to meet the liabilities of the schemes over the long-term. Included within other receivables in the balance sheet are $3.8 million (2012: $4.2 million) of listed investments which are held in trust for the benefit of members of the deferred compensation plan in North America. These amounts are not included within the assets shown in the table above as they are not controlled by the plan in question.

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BBA complete.indb 130 12/03/2014 12:45 19. Pensions and other post-retirement benefits – continued Consolidated Financial Statements Notes to the Consolidated United Kingdom North America Total Financial Statements 2013 2012 2011 2013 2012 2011 2013 2012 2011 Restated Restated Restated Restated Restated Restated $m $m $m $m $m $m $m $m $m Analysis of income statement charge Current service cost 4.1 3.2 2.6 0.2 0.2 0.2 4.3 3.4 2.8 Net interest on the net defined benefit asset/liability 1.0 0.9 1.3 1.3 1.4 1.3 2.3 2.3 2.6 Administration expenses 1.0 2.2 3.9 0.4 0.4 0.4 1.4 2.6 4.3 Loss due to settlements/curtailments and terminations – – – 0.1 – – 0.1 – – Expense recognised in income statement 6.1 6.3 7.8 2.0 2.0 1.9 8.1 8.3 9.7

United Kingdom North America Total 2013 2012 2011 2013 2012 2011 2013 2012 2011 Restated Restated Restated Restated Restated Restated $m $m $m $m $m $m $m $m $m Changes to the present value of the defined benefit obligation during the year Defined benefit obligation at beginning of year 763.5 667.3 626.5 74.3 69.3 65.8 837.8 736.6 692.3 Current service cost 4.1 3.2 2.6 0.2 0.2 0.2 4.3 3.4 2.8 Interest cost 28.8 30.6 33.4 2.6 2.9 3.2 31.4 33.5 36.6 Contributions by plan participants 0.7 0.8 0.8 – – – 0.7 0.8 0.8 Actuarial losses/(gains) on scheme liabilities 16.3 54.2 36.1 (7.8) 5.8 6.5 8.5 60.0 42.6 Experience (gains)/losses on scheme liabilities (25.6) 14.9 17.9 0.3 – – (25.3) 14.9 17.9 Net benefits paid out (41.2) (38.9) (40.6) (4.1) (3.9) (6.4) (45.3) (42.8) (47.0) Gains due to settlements and curtailments – – – 0.1 – – 0.1 – – Foreign currency exchange rate changes 17.9 31.4 (9.4) – – – 17.9 31.4 (9.4) Defined benefit obligation at end of year 764.5 763.5 667.3 65.6 74.3 69.3 830.1 837.8 736.6

United Kingdom North America Total 2013 2012 2011 2013 2012 2011 2013 2012 2011 Restated Restated Restated Restated Restated Restated $m $m $m $m $m $m $m $m $m Changes to the fair value of scheme assets during the year Fair value of scheme assets at beginning of year 733.0 652.4 634.7 38.5 35.0 36.3 771.5 687.4 671.0 Interest income on scheme assets 27.8 29.9 34.1 1.3 1.5 1.9 29.1 31.4 36.0 Actual employer contributions 11.7 10.1 10.9 2.3 4.2 5.8 14.0 14.3 16.7 Contributions by plan participants 0.7 0.8 0.8 – – – 0.7 0.8 0.8 Net benefits paid out (41.2) (38.9) (40.6) (4.1) (3.9) (6.4) (45.3) (42.8) (47.0) Actuarial gains/(losses) on assets 4.5 50.5 25.0 4.7 2.1 (2.2) 9.2 52.6 22.8 Administration expenses (1.0) (2.2) (3.9) (0.4) (0.4) (0.4) (1.4) (2.6) (4.3) Foreign currency exchange rate changes 18.3 30.4 (8.6) – – – 18.3 30.4 (8.6) Fair value of plan assets at end of year 753.8 733.0 652.4 42.3 38.5 35.0 796.1 771.5 687.4

The assets of the IPP are invested in a range of funds with different risk and return profiles. To the extent that the IPP is partially funded through asset performance, and actual investment returns achieved are lower than those assumed, then this may result in a worsening of the funding position and higher future cash contribution requirements for the Group. At 31 December 2013, the largest single category of investment held by the IPP is an annuity with a value of $432.2 million (58% of the asset holding at 31 December 2013) purchased from Legal and General which matches liabilities associated with pensioner members. The purpose of the annuity is to help reduce asset/liability mismatch risk.

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BBA complete.indb 131 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 19. Pensions and other post-retirement benefits – continued 93 Independent Auditor’s Report to the members of BBA Aviation plc United Kingdom North America Total 96 Consolidated Income Statement 2013 2012 2011 2013 2012 2011 2013 2012 2011 Restated Restated Restated Restated Restated Restated 97 Consolidated Statement of $m $m $m $m $m $m $m $m $m Comprehensive Income 98 Consolidated Balance Sheet Actual return on scheme assets 32.3 80.4 59.1 6.0 3.6 (0.3) 38.3 84.0 58.8 99 Consolidated Cash Flow Statement United Kingdom North America Total 100 Consolidated Statement of 2013 2012 2011 2013 2012 2011 2013 2012 2011 Changes in Equity Restated Restated Restated Restated Restated Restated 101 Accounting Policies of the Group $m $m $m $m $m $m $m $m $m 106 Notes to the Consolidated Analysis of amounts recognised in SOCI Financial Statements Liability (losses)/gains due to changes in 141 Company Balance Sheet financial assumptions (30.0) (54.2) (36.1) 8.1 (5.8) (6.5) (21.9) (60.0) (42.6) 142 Accounting Policies of Liability gains/(losses) due to changes in the Company demographic assumptions 13.7 – – (0.3) – – 13.4 – – 144 Notes to the Company Financial Statements Asset gains/(losses) arising during the period 4.5 50.5 25.0 4.7 2.1 (2.2) 9.2 52.6 22.8 149 Principal Subsidiary and Experience gains/(losses) on scheme liabilities 25.6 (14.9) (17.9) (0.3) – – 25.3 (14.9) (17.9) Associated Undertakings Movement in surplus restriction – – 8.6 – – – – – 8.6 150 Five Year Summary Movement in minimum funding liability (22.3) 4.5 21.0 – – – (22.3) 4.5 21.0 151 Shareholder Information Total (losses)/gains before exchange (losses)/gains (8.5) (14.1) 0.6 12.2 (3.7) (8.7) 3.7 (17.8) (8.1)

Exchange (losses)/gains (0.9) (1.0) 1.1 – – – (0.9) (1.0) 1.1 Total (losses)/gains recognised in SOCI (9.4) (15.1) 1.7 12.2 (3.7) (8.7) 2.8 (18.8) (7.0)

The Plan is exposed to inflation risk as a result of the decision to grant inflation-linked increases to pensions in payment and CARE revaluations. There is also a longevity risk to the Plan if member mortality improves beyond expectations. The sensitivity of the liabilities to such changes is given below.

Impact on defined benefit obligation United North Kingdom America Sensitivity analysis of the principal assumptions used to measure plan defined benefit obligations Increase of 0.25% in discount rate (25.9) (1.9) Decrease of 0.25% in discount rate 27.4 2.1 Increase of 0.25% in inflation 24.0 0.2 Decrease of 0.25% in inflation (26.3) (0.2) Increase of 0.25% in pension increase rate 17.9 0.2 Decrease of 0.25% in pension increase rate (17.2) (0.2) Increase of one year in life expectancy 24.8 0.9 Decrease of one year in life expectancy (24.4) (0.9) Increase of 0.25% in medical cost trend rates N/A – Decrease of 0.25% in medical cost trend rates N/A –

The sensitivity analysis is based on a change in one assumption while holding all other assumptions constant, therefore interdependencies between assumptions are excluded, with the exception of the inflation rate sensitivity which also impacts salary and pension increase assumptions. The analysis also makes no allowance for the impact of changes in gilt and corporate bond yields on asset values. The methodology applied is consistent to that used to determine the defined benefit obligation. The sensitivities exclude the impact of deferred tax.

United Kingdom North America Total $m $m $m Employer contributions for 2014 are estimated to be as follows: 15.8 3.3 19.1

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BBA complete.indb 132 12/03/2014 12:45 20. Deferred tax Consolidated Financial Statements Notes to the Consolidated Goodwill Tax losses Share- Financial Statements Fixed Other and and tax Retirement based assets assets intangibles credits benefits payments Total $m $m $m $m $m $m $m Beginning of year (11.4) 8.6 (93.4) 0.9 16.6 2.7 (76.0) Charge for the year (1.5) 8.8 (11.0) (0.9) (1.2) (0.9) (6.7) Credit to other comprehensive income and equity – – – – 1.5 1.8 3.3 Transfer to assets held for sale (0.8) (0.5) 1.2 – (0.1) – (0.2) Exchange adjustments – – – – 0.3 0.1 0.4 End of year (13.7) 16.9 (103.2) – 17.1 3.7 (79.2)

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes: 2013 2012 $m $m Deferred tax liabilities (87.8) (82.0) Deferred tax assets 8.6 6.0 (79.2) (76.0)

At the balance sheet date, the Group has unrecognised deferred tax assets relating to tax losses and other temporary differences of $328.8 million (2012: $322.9 million) available for offset against future profits. These assets have not been recognised as the precise incidence of future profits in the relevant countries and legal entities cannot be accurately predicted at this time. Included in the unrecognised deferred tax asset is $1.5 million (2012: $1.2 million) which relates to losses which will expire by 2017. Other losses may be carried forward indefinitely under current tax legislation. At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised is $nil (2012: $nil). Temporary differences arising in connection with interests in associates and joint ventures are insignificant.

21. Share capital and reserves Allotted, called up and fully paid 2013 2012 Share capital millions millions Number of shares 16 Ordinary 29 /21p shares 480.4 479.7 5% Cumulative preference £1 shares 0.2 0.2

2013 2012 Nominal value of shares $m $m Equity shares 16 Ordinary 29 /21p shares 251.8 251.5 Non-equity shares 5% Cumulative preference £1 shares 0.3 0.3 252.1 251.8

Issue of share capital 16 During the year, the Group issued 0.7 million (2012: 2.9 million) ordinary 29 /21p shares to satisfy the vesting of share awards under the BBA Aviation plc share option schemes. The consideration for shares issued in respect of share options was $0.5 million ($1.8 million).

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BBA complete.indb 133 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 21. Share capital and reserves – continued 93 Independent Auditor’s Report to 2013 2012 the members of BBA Aviation plc $m $m 96 Consolidated Income Statement Reserves attributable to equity interests 97 Consolidated Statement of Comprehensive Income Share premium account 98 Consolidated Balance Sheet Beginning of year 732.8 732.4 Issue of share capital 0.2 0.4 99 Consolidated Cash Flow Statement End of year 733.0 732.8 100 Consolidated Statement of Changes in Equity Other reserve 101 Accounting Policies of the Group Beginning and end of year 6.9 6.9 106 Notes to the Consolidated Financial Statements 141 Company Balance Sheet Treasury reserve 142 Accounting Policies of Beginning of year (5.5) (9.0) the Company Purchase of own shares (15.1) (15.2) 144 Notes to the Company Sale/transfer of own shares 0.1 2.8 Financial Statements Transfer from retained earnings 3.4 15.9 149 Principal Subsidiary and Associated Undertakings End of year (17.1) (5.5) 150 Five Year Summary 151 Shareholder Information Capital reserve Beginning of year 34.4 39.2 Credit to equity for equity-settled share-based payments 9.4 0.9 Transfer to retained earnings on exercise of equity-settled share-based payments (3.2) (5.7) End of year 40.6 34.4

Hedging reserve Beginning of year (16.8) (26.0) Increase/(decrease) in fair value of cash flow hedging derivatives 6.3 (0.3) Transfer to income statement 4.0 9.5 End of year (6.5) (16.8)

Translation reserve Beginning of year (21.2) (29.8) Exchange differences on translation of foreign operations (10.0) 8.6 End of year (31.2) (21.2)

Retained earnings Beginning of year 43.8 19.8 Transfer from capital reserve on exercise of equity-settled share-based payments 3.2 5.7 Transfer to treasury reserve (3.4) (15.9) Deferred tax on items taken directly to reserves 6.7 9.3 Actuarial gains/(losses) 3.7 (17.8) Dividends paid (71.3) (67.9) Profit for the year 138.5 110.6 121.2 43.8

16 At 31 December 2013 13,822 ordinary 29 /21p shares (2012: 13,882 shares) with a nominal value of £4,131 (2012: £4,131) and a market value of $73,880 (2012: $50,150) were held in the BBA Employee Benefit Trust, a trust set up in 2006. EES Trustees International Limited, the trustees of the BBA Employee Benefit Trust, has agreed to waive its dividend entitlement in certain circumstances. At 31 December 16 2013 3.5 million ordinary 29 /21p shares (2012: 1.5 million) with a nominal value of £1.0 million (2012: £0.4 million) and a market value of $18.5 million (2012: $5.2 million) were also held in the 1995 BBA Group Employee Share Trust. This included 26,101 shares (2012: 91,956 shares) being dividend reinvested on 24 May 2013 and 10,567 shares (2012: 9,995 shares) being dividend reinvested on 1 November 2013 under the Dividend Reinvestment Plan.

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BBA complete.indb 134 12/03/2014 12:45 21. Share capital and reserves – continued Consolidated Financial Statements Notes to the Consolidated Rights of non-equity interests Financial Statements 5% cumulative preference £1 shares i. entitle holders, in priority to holders of all other classes of shares, to a fixed cumulative preferential dividend at a rate of 5.0% per annum per share payable half yearly in equal amounts on 1 February and 1 August; ii. on a return of capital on a winding up, or otherwise, will carry the right to repayment of capital together with a premium of 12.5p per share and a sum equal to any arrears or deficiency of dividend; this right is in priority to the rights of the ordinary shareholders; and iii. carry the right to attend and vote at a general meeting of the Company only if, at the date of the notice convening the meeting, payment of the dividend to which they are entitled is six months or more in arrears, or if a resolution is to be considered at the meeting for winding-up the Company or reducing its share capital or sanctioning the sale of the undertakings of the Company or varying or abrogating any of the special rights attaching to them.

16 Rights of equity interests in 29 /21p ordinary shares 16 The rights of equity interests in 29 /21p ordinary shares are: i. each share has equal rights to dividends; ii. carry no right to fixed income; iii. on a return of capital on a winding-up, or otherwise, will carry the right to repayment of capital; this right is subordinate to the rights of the preference shareholders; and iv. carry the right to attend and vote at a meeting of the Company.

22. Share-based payments Equity-settled share-based payments (i) Share options The Group plan provides for a grant price equal to the average of the middle market price of a BBA Aviation ordinary share up to five dealing days prior to the date of grant. The vesting period is generally three to four years. If the options remain unexercised after a period of ten years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Group before the options vest. Details of the share options outstanding during the year are as follows: 2013 2012 Weighted Weighted average average Number of exercise Number of exercise share options price share options price Outstanding at the beginning of the year 7,759,739 184p 10,288,274 108p Granted during the year 181,596 37p 2,184,948 156p Exercised during the year (1,259,317) 249p (3,721,570) 66p Lapsed during the year (566,071) 202p (991,913) 225p Outstanding at the end of the year 6,115,947 144p 7,759,739 184p

Exercisable at the end of the year 601,759 298p 1,803,393 289p

The weighted average share price at the date of exercise for share options exercised during the period was 249p. The options outstanding at 31 December 2013 had weighted average remaining contractual life of 17 months, and an exercise price range of £0.57 to £2.99. Options over 181,596 shares were granted under the BBA UK Share Option Plan in the year. No options were granted under the BBA Savings Related Share Option Scheme. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted and calculated using the valuation technique most appropriate to each type of award. These include Black-Scholes calculations and Monte Carlo simulations. The inputs into the models were as follows:

Issued in Issued in December May 2013 2012 Weighted average share price (pence) 287 212 Weighted average exercise price (pence) 37 156 Expected volatility 25.5% N/A Expected life (months) 36 36 Risk-free rate 0.54% N/A Expected dividend yield 3.26% 4.7%

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BBA complete.indb 135 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 22. Share-based payments – continued 93 Independent Auditor’s Report to Expected volatility was determined by calculating the historical volatility of the Group’s share price over the period of time equivalent the members of BBA Aviation plc to the remaining contractual life of the option. The expected life used in the model has been adjusted, based on management’s best 96 Consolidated Income Statement estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 97 Consolidated Statement of Comprehensive Income (ii) Share awards 98 Consolidated Balance Sheet Details of the conditional share awards outstanding during the year are as follows: 99 Consolidated Cash Flow Statement 2013 2012 Number of shares Number of shares 100 Consolidated Statement of Changes in Equity Outstanding at the beginning of the year 11,192,585 17,601,235 101 Accounting Policies of the Group Granted during the year 3,357,914 5,309,420 106 Notes to the Consolidated Exercised during the year (1,637,777) (5,590,490) Financial Statements Lapsed during the year (941,859) (6,127,580) 141 Company Balance Sheet Outstanding at the end of the year 11,970,863 11,192,585 142 Accounting Policies of the Company The awards outstanding at 31 December 2013 had a weighted average remaining contractual life of 15 months. The weighted average 144 Notes to the Company Financial Statements fair value of conditional shares granted in the year was £2.58. 149 Principal Subsidiary and The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares granted and Associated Undertakings calculated using the valuation technique most appropriate to each type of award. These include Black-Scholes calculations and Monte 150 Five Year Summary Carlo simulations. The inputs into the model were as follows: 151 Shareholder Information Issued in May 2013 Issued in March 2012 Weighted average share price (pence) 287 213 Expected volatility 25.5% N/A Expected life (months) 36 36 Risk-free rate 0.54% N/A Expected dividend yield 3.26% 3.47% - 5.27%

Expected volatility was determined by calculating the historical volatility of the Group’s share price over the period of time equivalent to the remaining contractual life of the option. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

(iii) Expense charged to income statement The Group recognised a total expense of $6.0 million (2012: $0.9 million) related to equity-settled share-based payment transactions during the year.

(iv) Cash-settled share-based payments The Group issues to certain employees share appreciation rights (SARs) that require the Group to pay the intrinsic value of the SARs to the employee at the date of exercise. The fair value of the SARs is determined by using the valuation technique most appropriate to each type of award. These include the Black-Scholes calculations and Monte Carlo simulations and use the assumptions noted in the above table. The Group has recorded liabilities of $0.1 million (2012: $0.1 million) and a total charge of $0.2 million (2012: $0.7 million). The total intrinsic value of vested SARs at 31 December 2013 was $nil (2012: $0.2 million).

(v) Other share-based payment plan The Company’s savings-related share option scheme is open to all eligible UK employees. Options are granted at a price equal to the average three-day middle market price of a BBA Aviation ordinary share prior to the date of grant, less 20%. Options are granted under three or five-year SAYE contracts. The maximum overall employee contribution is £250 per month. Pursuant to this plan, the Group issued 128,331 ordinary shares in 2013 (2012: 325,270 ordinary shares).

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BBA_ARA_2013_Financials_92-.indd 136 14/03/2014 18:19 23. Cash flow from operating activities Consolidated Financial Statements Notes to the Consolidated 2013 2012 Financial Statements Restated $m $m Operating profit 169.4 160.0 Share of profit from associates and joint ventures (1.4) (1.6) Profit from operations 168.0 158.4 Depreciation of property, plant and equipment 53.9 52.7 Amortisation of intangible assets 16.6 15.4 Profit on sale of property, plant and equipment (0.7) (0.3) Share-based payment expense 6.0 0.9 Increase in provisions 2.5 – Decrease in net pension liability (8.3) (8.3) Other non-cash items 0.7 4.8 Unrealised foreign exchange movements 0.1 1.3 Operating cash inflows before movements in working capital 238.8 224.9 Decrease/(increase) in working capital 21.7 (12.8) Cash generated by operations 260.5 212.1 Income taxes paid (17.8) (4.9) Net cash inflow from operating activities 242.7 207.2

Dividends received from associates 1.3 0.8 Purchase of property, plant and equipment (71.0) (51.1) Purchase of intangible assets† (7.0) (5.0) Proceeds from disposal of property, plant and equipment 1.7 0.7 Interest received 4.1 7.3 Interest paid (25.2) (38.3) Interest element of finance leases paid (0.1) (0.4) Free cash flow 146.5 121.2

† Purchase of intangible assets excludes $11.8 million (2012: $0.4 million) paid in relation to Ontic licences since the directors believe these payments are more akin to expenditure in relation to acquisitions, and are therefore outside of the Group’s definition of free cash flow. These amounts are included within purchase of intangible assets on the face of the cash flow statement.

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BBA complete.indb 137 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 24. Acquisition of businesses 93 Independent Auditor’s Report to Year ended 31 December 2013 the members of BBA Aviation plc During the year, the Group made the following acquisitions to continue the expansion of its Flight Support network: 96 Consolidated Income Statement 97 Consolidated Statement of — On 21 June 2013, the Group acquired substantially all the assets of Fernley Heathrow Limited, an aircraft cabin cleaning, Comprehensive Income de-icing and aircraft exterior washing business based at London Heathrow Airport and London Gatwick Airport for a 98 Consolidated Balance Sheet consideration of $3.2 million. 99 Consolidated Cash Flow Statement — On 2 July 2013, the Group acquired substantially all the assets of Fernley Ireland Ltd, a de-icing business based at Dublin airport for a consideration of $1.1 million. 100 Consolidated Statement of Changes in Equity — On 31 December 2013, the Group acquired substantially all the assets of Maguire Aviation Group LLC (Maguire), an FBO 101 Accounting Policies of the Group operating in Van Nuys, Los Angeles for a consideration of $69.3 million. 106 Notes to the Consolidated Financial Statements The fair value of the net assets acquired and goodwill arising on these acquisitions are set out below: 141 Company Balance Sheet Maguire Other Total 142 Accounting Policies of 2013 2013 2013 the Company $m $m $m 144 Notes to the Company Intangible assets 19.6 – 19.6 Financial Statements Property, plant and equipment 39.0 3.0 42.0 149 Principal Subsidiary and Associated Undertakings Inventories 0.3 0.9 1.2 150 Five Year Summary Receivables 0.5 0.1 0.6 Payables (0.3) (0.2) (0.5) 151 Shareholder Information Net assets 59.1 3.8 62.9 Goodwill 10.2 0.5 10.7 Total consideration 69.3 4.3 73.6 Satisfied by: Cash consideration 67.0 4.3 71.3 Deferred consideration 2.3 – 2.3 69.3 4.3 73.6 Net cash flow arising on acquisition Cash consideration 67.0 4.3 71.3 Directly attributable costs 1.2 0.4 1.6 68.2 4.7 72.9

Due to the proximity of the acquisitions to the year end, the fair values set out above are provisional and are subject to amendment on finalisation of the fair value exercises. In addition, a decrease of $1.3 million was made to goodwill as a result of finalising the fair values in respect of prior year acquisitions in the Flight Support segment. Costs of $8.7 million comprising the directly attributable costs of acquisition of $1.6 million and costs relating primarily to disposals and aborted acquisitions, totalling $7.1 million, are included within other operating expenses. The goodwill arising on these acquisitions is attributable to the anticipated profitability arising from the growth of the Signature network, expansion of the Group’s ASIG business, together with anticipated future operating synergies. $10.5 million of the goodwill is expected to be deductible for income tax purposes. In the period since acquisition, the operations acquired have contributed $4.0 million of revenue and a net loss of $0.1 million to operating profit. If the acquisitions had occurred on the first day of the financial year, the total revenue and operating profit from these acquisitions is estimated to be $29.1 million and $4.7 million respectively.

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BBA_ARA_2013_Financials_92-.indd 138 14/03/2014 18:20 25. Assets and associated liabilities classified as held for sale Consolidated Financial Statements Notes to the Consolidated On 19 December 2013, the Board resolved to dispose of the Group’s APPH business, part of the Aftermarket Services segment. Financial Statements The completion of the sale of the business to Héroux-Devtek took place on 3 February 2014 and so the assets and liabilities of APPH have been classified as held for sale as at 31 December 2013 as follows:

2013 2012 $m $m Assets held for sale Goodwill 8.5 – Intangible assets 0.5 – Property, plant and equipment 12.0 – Inventories 49.6 – Trade and other receivables 16.1 – Deferred taxation 1.9 – Cash and cash equivalents 2.9 – Total assets classified as held for sale 91.5 –

Liabilities associated with assets held for sale Trade and other payables (13.2) – Borrowings (2.5) – Deferred taxation (1.7) – Provisions (0.5) – Total liabilities associated with assets held for sale (17.9) –

Net assets classified as held for sale 73.6 –

26. Contingent liabilities The Group is party to legal proceedings and claims which arise in the normal course of business, including specific product liability and environmental claims. Any liabilities are likely to be mitigated by legal defences, insurance, reserves and third party indemnities. Additionally, the Group has previously owned businesses that manufactured products containing asbestos. No BBA company has manufactured or sold any products or materials containing asbestos for many years. A small number of former BBA companies have been named as defendants to asbestos-related claims. When these companies were sold, BBA retained certain obligations to indemnify the purchasers against such claims. Notwithstanding such indemnity arrangements, the costs incurred by BBA in dealing with claims made against these former BBA companies have been immaterial to BBA. During the period 1989 to 31 December 2013, BBA’s aggregate costs of defending and disposing of all asbestos-related claims, net of insurance coverage, were approximately $16.7 million. BBA maintains a portfolio of insurance coverage in respect of the majority of such claims, including legal defence costs and liability cover. State operated compensation programmes have also provided coverage. On the basis of its past claims experience, as at 31 December 2013, BBA has provided $3.7 million (2012: $nil) in respect of such claims. Whilst the outcome of these claims are, by their nature, uncertain, the directors do not currently anticipate that the outcome of the proceedings and claims set out above either individually, or in aggregate, will materially exceed the insurance coverage or amounts provided as shown in note 18, and are not expected to have a material adverse effect upon the Group’s financial position.

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BBA complete.indb 139 12/03/2014 12:45 Consolidated Financial Statements Notes to the Consolidated Financial Statements – continued Notes to the Consolidated Financial Statements

Financial statements 27. Related party transactions 93 Independent Auditor’s Report to Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are the members of BBA Aviation plc not disclosed in this note. Details of transactions between the Group and other related parties are detailed below. 96 Consolidated Income Statement 97 Consolidated Statement of Compensation of key management personnel Comprehensive Income Key management are the directors and members of the Executive Committee. The remuneration of directors and other members 98 Consolidated Balance Sheet of key management during the year was as follows: 99 Consolidated Cash Flow Statement 2013 2012 $m $m 100 Consolidated Statement of Changes in Equity Short-term benefits 7.1 7.6 101 Accounting Policies of the Group Post-employment benefits 0.7 0.8 106 Notes to the Consolidated Share-based payments 0.8 0.8 Financial Statements 8.6 9.2 141 Company Balance Sheet 142 Accounting Policies of the Company Post-employment benefits include contributions of $0.6 million (2012: $0.7 million) in relation to defined contribution schemes. The remuneration of directors and key executives is determined by the Remuneration Committee having regard to the 144 Notes to the Company Financial Statements performance of individuals and market trends. The directors’ remuneration is disclosed in the Directors’ Remuneration Report 149 Principal Subsidiary and on pages 69 to 88. Associated Undertakings Share-based payments of $0.8 million (2012: $0.8 million) disclosed in the above table exclude the portion of the annual bonus 150 Five Year Summary subject to compulsory deferral, which will be expensed over the vesting period in accordance with IFRS 2: Share-based Payment. 151 Shareholder Information The 2013 annual bonus subject to compulsory deferral is $1.1 million (2012: $1.0 million).

Other related party transactions During the year, Group companies entered into the following transactions with related parties which are not members of the Group:

Amounts owed by Amounts owed to Sales of goods Purchase of goods related parties related parties 2013 2012 2013 2012 2013 2012 2013 2012 $m $m $m $m $m $m $m $m Associates 16.3 18.1 454.7 449.9 2.1 5.1 42.6 27.7

Purchases of goods principally relates to the purchase of aviation fuel. Purchases were made at market price discounted to reflect the quantity of goods purchased. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. At the balance sheet date, Group companies had loan receivables from an associated undertaking of $2.4 million (2012: $2.9 million). The loans are unsecured and will be settled in cash, and were made on terms which reflect the relationships between the parties. The Group operates various pension and other post-retirement benefit schemes for its employees. Details are set out in note 19.

28. Post balance sheet events On 3 February 2014, BBA announced the completion of the sale of its 100% shareholding in APPH, part of the Aftermarket Services division, for a total cash consideration of $128.0 million. The business has been sold to Héroux-Devtek, a Canadian company specialising in the design and manufacture of landing gear systems and components. As a result of the disposal of APPH, ordinarily a section 75 debt would have been triggered. The Group has agreed with the Trustees of the BBA Income and Protection Plan to apportion the section 75 debt and put in place an asset backed funding structure which will replace the previously agreed schedule of deficit contributions set out in note 19.

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BBA complete.indb 140 12/03/2014 12:45 Company Balance Sheet Company Financial Statements Company Balance Sheet

2013 2012 Notes £m £m Fixed assets Tangible fixed assets 3 1.1 0.8 Fixed asset investments 4 2,329.5 2,314.7 2,330.6 2,315.5 Current assets Derivative financial instruments - due after one year 5 5.9 17.3 Derivative financial instruments - due within one year 5 3.0 2.0 Debtors due within one year 6 838.6 930.1 Cash at bank and in hand 8 3.8 18.9 851.3 968.3 Current liabilities Creditors: amounts falling due within one year Borrowings and finance leases 7, 8 (7.3) (0.1) Derivative financial instruments 5 (5.4) (17.8) Others 7 (1,881.3) (1,884.6) Net current liabilities (1,042.7) (934.2) Total assets less current liabilities 1,287.9 1,381.3 Creditors: amounts falling due after more than one year Borrowings and finance leases 8, 9 (376.3) (356.3) Derivative financial instruments 5 (6.2) (4.7) Provisions (2.2) (2.3) Total net assets 903.2 1,018.0

Capital and reserves Called up share capital 11 143.0 142.8 Share premium account 11 415.0 414.8 Other reserves 11 247.6 245.5 Profit and loss account 11 97.6 214.9 Equity shareholders’ funds 903.2 1,018.0

The financial statements of BBA Aviation plc (registered number 53688) were approved by the Board of Directors on 4 March 2014 and signed on its behalf by:

Simon Pryce Mark Hoad Group Chief Executive Group Finance Director

In accordance with the exemptions permitted by s408 of the Companies Act 2006, the profit and loss account of the Company has not been presented. The loss for the financial year in the accounts of the Company amounted to £77.1 million (2012: profit £203.9 million).

The auditor’s remuneration for audit and other services is disclosed in note 2 to the consolidated financial statements.

The accompanying notes are an integral part of this balance sheet.

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BBA complete.indb 141 12/03/2014 12:45 Company Financial Statements Accounting Policies of the Company Pensions and other post-retirement benefits Accounting Policies of the Company The Company provides pension arrangements to the majority Basis of Accounting of full time employees through the Company’s defined benefit Financial statements The separate financial statements of the Company are presented scheme. It is not possible to identify the share of underlying 93 Independent Auditor’s Report to the members of BBA Aviation plc as required by the Companies Act 2006. The financial statements assets and liabilities in this scheme which is attributable to the 96 Consolidated Income Statement have been prepared using the historical cost convention Company on a consistent and reasonable basis. Therefore the adjusted for the revaluation of certain fixed assets and in Company has applied the provisions in FRS17 to account for 97 Consolidated Statement of Comprehensive Income accordance with applicable United Kingdom accounting the scheme as if it was a defined contribution scheme. 98 Consolidated Balance Sheet standards and law. The costs of pension plans and other post-retirement 99 Consolidated Cash Flow The financial statements have been prepared on a going benefits are charged to the profit and loss account so as to Statement concern basis in accordance with the rationale set out in the spread the costs over employees’ working lives within the 100 Consolidated Statement of directors’ statement of going concern on page 89 of the Company. The contribution levels are determined by valuations Changes in Equity Directors’ Report. undertaken by independent qualified actuaries. 101 Accounting Policies of the Group The Company has taken advantage of the exemption from 106 Notes to the Consolidated preparing a cash flow statement under the terms of FRS 1: Cash Share-based payments Financial Statements flow statements. The Company is exempt under the terms of The Company operates a number of cash and equity-settled 141 Company Balance Sheet FRS 8: Related party disclosures, from disclosing related party share-based compensation plans. The fair value of the 142 Accounting Policies of the Company transactions with wholly owned subsidiaries of BBA Aviation plc. compensation is recognised in the profit and loss account as 144 Notes to the Company The Company has taken full advantage of the exemption to an expense. The total amount to be expensed over the vesting Financial Statements provide financial instrument disclosures under the terms of period is determined by reference to the fair value of the options 149 Principal Subsidiary and FRS 29: Financial instruments: Disclosures. granted and calculated using the valuation technique most Associated Undertakings The principal accounting policies are set out below. They appropriate to each type of award. These include Black-Scholes 150 Five Year Summary have all been applied consistently throughout the current and calculations and Monte Carlo simulations. For cash-settled 151 Shareholder Information preceeding periods. options, the fair value of the option is revisited at each balance sheet date. For both cash and equity-settled options, Investments the Company revises its estimates of the number of options In the Company’s financial statements, investments in subsidiary that are expected to become exercisable at each balance and associated undertakings are stated at cost less provision sheet date. for impairment. Tangible fixed assets Treasury Plant and machinery and land and buildings are stated in the Transactions in foreign currencies are translated into sterling at balance sheet at cost. Depreciation is provided on the cost the rate of exchange at the date of the transaction. Monetary of tangible fixed assets less estimated residual value and is assets and liabilities denominated in foreign currencies at calculated on a straight-line basis over the following estimated the balance sheet date are recorded at the rates of exchange useful lives of the assets: prevailing at that date. Any gain or loss arising from a change in exchange rates subsequent to the date of transaction is Land Not depreciated recognised in the profit and loss account. Buildings 40 years maximum Derivative financial instruments utilised by the Group Plant and machinery (including essential comprise interest rates swaps, cross currency or basis swaps commissioning costs) 3-18 years and foreign exchange contracts. All such instruments are used for hedging purposes to manage the risk profile of an underlying Tooling, vehicles, computer and office equipment are exposure of the Group in line with the Group’s risk management categorised within plant and machinery in note 3 of the policies. All derivative instruments are recorded on the balance accounts. sheet at fair value. Recognition of gains or losses on derivative The revaluation reserve consists of the surpluses on instruments depends on whether the instrument is designated the revaluation of land and buildings to their market value for as a hedge and the type of exposure it is designed to hedge. existing use and on the revaluation of plant and machinery to The effective portion of gains or losses on cash flow net current replacement cost. The directors are not aware of hedges are deferred in equity until the impact from the hedged any material change to the value of these assets since the last item is recognised in the profit and loss account. The ineffective revaluation. portion of such gains and losses is recognised in the profit and loss account immediately. Gains or losses on the qualifying part of net investment hedges are recognised in equity together with the gains and losses on the underlying net investment. The ineffective portion of such gains and losses is recognised in the profit and loss account. Changes in the fair value of the derivative financial instruments that do not qualify for hedge accounting are recognised in the profit and loss account as they arise.

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BBA complete.indb 142 12/03/2014 12:45 Leases Company Financial Statements Accounting Policies of the Company Where assets are financed by lease agreements that give rights similar to ownership (finance leases), the assets are treated as if they had been purchased and the leasing commitments are shown as obligations to the lessors. The capitalisation values of the assets are written off on a straight-line basis over the shorter of the periods of the leases or the useful lives of the assets concerned. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant rate of charge on the balance of capital payments outstanding. For all other leases (operating leases) the rental payments are charged to the income statement on a straight line basis over the lives of the leases.

Taxation The charge for taxation is based on the profit for the year and takes into account taxation deferred due to timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is provided in full on all liabilities. In accordance with FRS 19, deferred tax assets are recognised to the extent it is regarded that it is more likely than not that they will be recovered. Deferred tax assets and liabilities have not been discounted. Deferred tax is not provided on timing differences arising from the sale or revaluation of fixed assets unless, at the balance sheet date, a binding commitment to sell the asset has been entered into and it is unlikely that any gain will qualify for rollover relief.

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BBA complete.indb 143 12/03/2014 12:45 Company Financial Statements Notes to the Company Financial Statements Notes to the Company Financial Statements

Financial statements 1. Dividends 93 Independent Auditor’s Report to Details of the Company’s dividends paid are provided in note 5 of the consolidated financial statements. the members of BBA Aviation plc 96 Consolidated Income Statement 2. Directors and employees 97 Consolidated Statement of Comprehensive Income Emoluments and interests 98 Consolidated Balance Sheet Details of directors’ emoluments and interests are provided within the Directors’ Remuneration Report on pages 69 to 88. 99 Consolidated Cash Flow Statement Employees 100 Consolidated Statement of Changes in Equity 2013 2012 101 Accounting Policies of the Group Average monthly number 46 36 106 Notes to the Consolidated Financial Statements 2013 2012 141 Company Balance Sheet £m £m 142 Accounting Policies of the Company Salaries 5.4 5.6 Social security 1.3 1.2 144 Notes to the Company Financial Statements Pension 6.2 5.3 149 Principal Subsidiary and 12.9 12.1 Associated Undertakings 150 Five Year Summary 151 Shareholder Information 3. Tangible fixed assets Land and Plant and Land and Plant and buildings machinery Total buildings machinery Total 2013 2013 2013 2012 2012 2012 £m £m £m £m £m £m Cost or valuation Beginning of year 0.8 1.1 1.9 0.6 1.0 1.6 Additions – 0.5 0.5 0.7 0.3 1.0 Asset write downs –––(0.5) (0.2) (0.7) End of year 0.8 1.6 2.4 0.8 1.1 1.9

Accumulated depreciation Beginning of year 0.2 0.9 1.1 0.6 0.9 1.5 Provided during the year 0.1 0.1 0.2 0.1 0.1 0.2 Asset write downs –––(0.5) (0.1) (0.6) End of year 0.3 1.0 1.3 0.2 0.9 1.1 Net book value end of year Owned assets – 0.6 0.6 – 0.2 0.2 Leased assets 0.5 – 0.5 0.6 – 0.6 0.5 0.6 1.1 0.6 0.2 0.8

2013 2012 £m £m Land and buildings Short leasehold 0.5 0.6 0.5 0.6

144

BBA complete.indb 144 12/03/2014 12:45 4. Fixed asset investments Company Financial Statements Notes to the Company 2013 2012 Financial Statements £m £m Subsidiary undertakings Cost of shares Beginning of year 2,239.7 2,239.7 Additions 14.8 – End of year 2,254.5 2,239.7 Provisions for impairments At beginning and end of year (28.4) (28.4) Net book value end of year 2,226.1 2,211.3

Loans to subsidiary undertakings At beginning and end of year 103.4 103.4 Total Fixed asset investments 2,329.5 2,314.7

The principal subsidiary undertakings of BBA Aviation plc are listed on page 149.

5. Derivative financial instruments 2013 2012 2013 Non- 2013 2012 Non- 2012 Current current Total Current current Total £m £m £m £m £m £m Derivative financial assets Foreign currency forward contracts 3.0 1.7 4.7 2.0 0.5 2.5 Interest rate swaps – 4.2 4.2 – 16.8 16.8 3.0 5.9 8.9 2.0 17.3 19.3

Derivative financial liabilities Foreign currency forward contracts (5.0) (1.3) (6.3) (2.1) (0.5) (2.6) Interest rate swaps (0.4) (4.9) (5.3) (2.2) (4.2) (6.4) Cross currency swaps –––(13.5) – (13.5) (5.4) (6.2) (11.6) (17.8) (4.7) (22.5)

Details of the foreign currency forward contracts, interest rate swaps and cross currency swaps are provided in note 17 to the Group consolidated financial statements.

6. Debtors 2013 2012 £m £m Amounts owed by subsidiary undertakings 813.9 906.9 Deferred tax 2.9 – Other debtors, prepayments and accrued income 21.8 23.2 Debtors due within one year 838.6 930.1

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BBA_ARA_2013_Financials_92-.indd 145 14/03/2014 18:20 Company Financial Statements Notes to the Company Financial Statements – continued Notes to the Company Financial Statements

Financial statements 7. Creditors: amounts falling due within one year 2013 2012 93 Independent Auditor’s Report to £m £m the members of BBA Aviation plc 96 Consolidated Income Statement Borrowings (note 8) 97 Consolidated Statement of Bank loans and overdrafts 7.3 0.1 Comprehensive Income 7.3 0.1 98 Consolidated Balance Sheet 99 Consolidated Cash Flow Other Statement Amounts owed to subsidiary undertakings 1,847.0 1,868.4 100 Consolidated Statement of Corporate tax – UK 23.6 – Changes in Equity Other taxation and social security 0.3 0.2 101 Accounting Policies of the Group Other creditors 1.9 1.5 106 Notes to the Consolidated Accruals and deferred income 8.5 14.5 Financial Statements 141 Company Balance Sheet 1,881.3 1,884.6 142 Accounting Policies of the Company Creditor days for the Company for the year end were an average of 34 days (2012: 28 days). 144 Notes to the Company Financial Statements 8. Cash and borrowings 2013 2012 149 Principal Subsidiary and £m £m Associated Undertakings Borrowings summary 150 Five Year Summary Medium-term loans 151 Shareholder Information Repayable between two and five years 191.7 154.3 Repayable in more than five years 184.6 202.0 Borrowings: due after more than one year 376.3 356.3

Short-term Overdrafts, borrowings and finance leases repayable within one year (note 7) 7.3 0.1 Total borrowings and finance leases 383.6 356.4 Cash at bank and in hand (3.8) (18.9) Net borrowings and finance leases 379.8 337.5

2013 2012 Borrowings analysis £m £m Unsecured Bank loans and overdrafts Sterling 5.5 0.3 US dollar 378.1 356.1 Total borrowings and finance leases 383.6 356.4 Cash at bank and in hand (3.8) (18.9) Net borrowings and finance leases 379.8 337.5

The interest rates on unsecured loans range from 0.8% to 5.9% per annum and repayments are due at varying dates up to 2023.

2013 2012 Operating lease commitments £m £m Land and buildings Within one year 0.4 – One to five years 2.0 1.2 More than five years 1.7 2.1 4.1 3.3

2013 2012 Contingent liabilities £m £m Guarantees of subsidiary undertakings’ overdrafts or loans and other guarantees 14.9 9.7

Additional details of contingent liabilities are provided within note 26 to the consolidated financial statements.

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BBA complete.indb 146 12/03/2014 12:45 9. Creditors: amounts falling due after more than one year Company Financial Statements Notes to the Company 2013 2012 Financial Statements £m £m Borrowings (note 8) Bank loans 376.3 356.3 376.3 356.3

10. Reconciliation of movements in shareholders’ funds 2013 2012 £m £m (Loss)/profit for the period (77.1) 203.9 Equity dividends (45.5) (42.1) (122.6) 161.8 Fair value movements in interest rate cash flow hedges 4.3 (3.0) Credit to equity for equity-settled share-based payments 6.0 0.5 Movement on treasury reserve (9.4) (7.8) Tax on items recognised directly in equity 5.4 – Transfer to profit or loss from equity on interest rate hedges 1.1 6.4 Issue of shares 0.4 1.2 Net movement in shareholders’ funds for the period (114.8) 159.1 Shareholders’ funds at beginning of year 1,018.0 858.9 Shareholders’ funds at end of year 903.2 1,018.0

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BBA_ARA_2013_Financials_92-.indd 147 14/03/2014 18:20 Company Financial Statements Notes to the Company Financial Statements – continued Notes to the Company Financial Statements

Financial statements 11. Capital and reserves 93 Independent Auditor’s Report to Details of Company share capital are provided within note 21 to the consolidated financial statements. the members of BBA Aviation plc 2013 2012 £m £m 96 Consolidated Income Statement 97 Consolidated Statement of Reserves attributable to equity interests Comprehensive Income Share premium account 98 Consolidated Balance Sheet Beginning of year 414.8 414.5 99 Consolidated Cash Flow Premium on shares issued 0.2 0.3 Statement End of year 415.0 414.8 100 Consolidated Statement of Changes in Equity 101 Accounting Policies of the Group Revaluation reserve 106 Notes to the Consolidated Beginning and end of year 3.5 3.5 Financial Statements 141 Company Balance Sheet Merger reserve 142 Accounting Policies of the Company Beginning and end of year 99.3 99.3 144 Notes to the Company Financial Statements Capital reserve 149 Principal Subsidiary and Beginning of year 151.9 155.0 Associated Undertakings Credit to equity for equity-settled share-based payments 6.0 0.5 150 Five Year Summary Transfer to retained earnings on exercise of equity-settled share-based payments (2.1) (3.6) 151 Shareholder Information End of year 155.8 151.9

Treasury reserve Beginning of year (3.1) (5.4) Purchase of own shares (9.4) (7.8) Transfer to profit and loss account 2.2 10.1 End of year (10.3) (3.1)

Hedging reserve Beginning of year (6.1) (9.5) Decrease in fair value of interest rate cash flow hedge 4.3 (3.0) Transfer to income 1.1 6.4 End of year (0.7) (6.1)

Profit and loss account Beginning of year 214.9 59.6 Transfer from capital reserve on exercise of equity-settled share-based payments 2.1 3.6 Transferred from treasury reserve (2.2) (10.1) Tax on items taken directly to reserves 5.4 – (Loss)/profit for the period (77.1) 203.9 Equity dividends (45.5) (42.1) End of year 97.6 214.9

16 At 31 December 2013 13,882 ordinary 29 /21p shares (2012: 13,882 shares) with a nominal value of £4,132 (2012: £4,132) and a market value of £44,506 (2012: £30,957) were held in the BBA Employee Benefit Trust, a trust set up in 2006. EES Trustees International Limited, the trustees of the BBA Employment Benefit Trust, has agreed to waive its dividend entitlement in certain circumstances. At 31 December 16 2013 3,471,749 ordinary 29 /21p shares (2012: 1,451,830) with a nominal value of £1,033,259 (2012: £432,092) and a market value of £11,130,427 (2012: £3,237,581) were held in the 1995 BBA Group Employee Share Trust. This included 26,101 shares being dividend reinvested on 24 May 2013 and 10,567 shares being dividend reinvested on 1 November 2013 under the Dividend Reinvestment Plan.

12. Share-based payments Details of share-based payments are provided within note 22 to the consolidated financial statements.

13. Pension and other post-retirement benefits The Company operates a defined benefit pension scheme in the United Kingdom, assets are held in a separate trustee-administered fund. Contributions to the scheme are made and pension cost is assessed using the projected unit method.

148 Details of the UK scheme are provided within note 19 to the consolidated financial statements.

BBA complete.indb 148 12/03/2014 12:45 Principal Subsidiary and Associated Undertakings Principal Subsidiary and Associated Undertakings The following is a list of the principal subsidiary and associated undertakings of the Group at 31 December 2013, each of which is wholly-owned unless otherwise stated. A complete list of subsidiary and associated undertakings is filed with the Company’s Annual Return.

Subsidiary undertakings Country of incorporation Principal operation Signature Flight Support Paris SA France Aircraft services APPH Limited United Kingdom Landing gear provider ASIG Limited United Kingdom Aircraft services ASIG Ground Handling Limited United Kingdom Aircraft services Balderton Aviation Holdings Limited* United Kingdom Holding company H+S Aviation Limited* United Kingdom Engine repair and overhaul Ontic Engineering and Manufacturing UK Limited United Kingdom Legacy support services Signature Flight Support London Luton Limited United Kingdom Aircraft services Signature Flight Support UK Regions Limited United Kingdom Aircraft services Aircraft Service International Group Incorporated USA Aircraft services APPH Wichita Incorporated USA Landing gear provider APPH Houston Incorporated USA Legacy support services Barrett Turbine Engine Company USA Engine repair and overhaul Dallas Airmotive Incorporated USA Engine repair and overhaul Executive Beechcraft Incorporated USA Aircraft services International Governor Services LLC USA Legacy support services Ontic Engineering and Manufacturing Incorporated USA Legacy support services Signature Flight Support Corporation USA Aircraft services

*shares held by BBA Aviation plc.

Associated undertaking % ownership Country of incorporation Principal operation Pafco LLC 50 USA Aviation fuel supplier

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BBA complete.indb 149 12/03/2014 12:45 Five Year Summary Five Year Summary

Financial statements 2012 2011 2010 2009 2013 Restated1 Restated1 Restated1 Restated1 93 Independent Auditor’s Report to $m $m $m $m $m the members of BBA Aviation plc 96 Consolidated Income Statement Income statement Revenue 2,218.6 2,178.9 2,136.7 1,833.7 1,686.1 97 Consolidated Statement of Comprehensive Income Underlying operating profit (continuing operations) 200.1 192.7 194.5 167.7 152.6 98 Consolidated Balance Sheet Exceptional items (25.3) (32.7) (6.6) (15.8) (28.4) 99 Consolidated Cash Flow Interest (net) (29.6) (34.9) (33.1) (26.4) (36.2) Statement Profit before tax 145.2 125.1 154.8 125.5 88.0 100 Consolidated Statement of Changes in Equity Tax (7.1) (14.8) (11.5) (31.3) (22.6) 101 Accounting Policies of the Group Profit for the period 138.1 110.3 143.3 94.2 65.4 106 Notes to the Consolidated Non-controlling interests 0.4 0.3 0.3 0.2 3.7 Financial Statements Profit attributable to ordinary shareholders 138.5 110.6 143.6 94.4 69.1 141 Company Balance Sheet 142 Accounting Policies of the Company Earnings per share 144 Notes to the Company Basic: Financial Statements Adjusted 30.5¢ 27.9¢ 27.1¢ 25.7¢ 22.4¢ 149 Principal Subsidiary and Unadjusted 28.9¢ 23.1¢ 30.6¢ 22.1¢ 16.5¢ Associated Undertakings Diluted: 150 Five Year Summary Adjusted 30.1¢ 27.5¢ 26.4¢ 24.9¢ 21.9¢ 151 Shareholder Information Unadjusted 28.5¢ 22.7¢ 29.8¢ 21.4¢ 16.1¢ Dividends Dividends per ordinary share 15.40¢ 14.65¢ 13.94¢ 13.09¢ 11.70¢

Balance sheet Employment of capital Non-current assets 1,652.6 1,585.0 1,558.1 1,453.8 1,493.8 Net current assets 254.3 217.4 173.4 57.8 220.0 Total assets less current liabilities 1,906.9 1,802.4 1,731.5 1,511.6 1,713.8 Non-current liabilities (711.0) (671.8) (638.9) (657.6) (912.8) Provisions for liabilities and charges (101.9) (109.2) (112.9) (96.6) (80.9) Net assets 1,094.0 1,021.4 979.7 757.4 720.1

Capital employed Called up share capital 251.8 251.5 250.1 228.6 224.6 Reserves 846.9 774.4 733.5 532.9 498.0 Shareholders’ funds 1,098.7 1,025.9 983.6 761.5 722.6 Non-controlling interests (4.7) (4.5) (3.9) (4.1) (2.5) 1,094.0 1,021.4 979.7 757.4 720.1

Capital expenditure 89.8 56.5 43.9 43.1 43.4 Number of employees, end of year 11,212 11,430 10,415 10,049 9,540

1 The results for the years ended 31 December 2009 to 2012 have been restated for the impact of applying IAS 19R.

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Analysis of shareholdings Share price information Ordinary shareholdings at 31 December 2013 The price of the Company’s shares is available at

Number of % of Number of % of share www.bbaaviation.com. shareholders total shares capital For the purpose of Capital Gains Tax calculations, the base Size of holding cost of the old BBA Group plc shares held immediately before 1–1,000 1,810 47.48 682,066 0.14 the demerger on 17 November 2006 has to be apportioned 1,001–5,000 1,198 31.43 2,717,202 0.57 between BBA Aviation plc shares and Fiberweb plc shares. 5,001–10,000 266 6.98 1,911,858 0.40 The ratio is BBA Aviation plc shares 84.73%: Fiberweb plc 10,001–50,000 276 7.24 6,047,245 1.26 shares 15.27%. This is based on the respective market values 50,001–100,000 52 1.36 3,740,628 0.78 on 17 November 2006, determined according to CGT rules 100,001–upwards 210 5.51 465,344,098 96.85 at that time, of 281.155p for BBA Aviation plc shares and 170.5p for Fiberweb plc shares. This information is provided as indicative 3,812 100.00 480,443,097 100.00 guidance. Any person wishing to calculate their Capital Gains Tax should take their own financial advice from their Dividends accountant or other authorised financial adviser and if they are Shareholders will receive their dividend payment in sterling in any doubt about their taxation position they should obtain unless they have elected to receive it in US dollars. If you wish to professional advice. receive your dividends in US dollars, your appropriate election must be received by Capita Registrars no later than 5.30pm on Company registrar 30 April 2014. Please note that if you have previously made a valid Capita Asset Services election that election will cover all future dividend payments and The Registry a new election is not required. The dividend will be converted 34 Beckenham Road at a prevailing exchange rate on 1 May 2014 and this exchange Beckenham rate will be announced on 2 May 2014. Kent BR3 4TU Telephone: 0871 664 0300 Dividend Reinvestment Plan (calls cost 10p per minute plus network charges) A Dividend Reinvestment Plan is available, giving ordinary Lines are open 9.00 am – 5.30 pm Mon – Fri shareholders the option to buy shares in lieu of a cash dividend. From outside the UK: +44 20 8639 3399 Please contact the Company’s registrars for further details. e-mail: [email protected] www.capitaassetservices.com Share dealing service A share dealing service is available for UK shareholders from Please contact the registrar directly if you wish to advise Capita Asset Services to either sell or buy BBA Aviation plc a change of name, address or dividend mandate or wish to shares. For further information on this service, please contact: participate in the Dividend Reinvestment Plan or wish to elect www.capitadeal.com (on-line dealing) or 0871 664 0384 to take your dividend in US dollars rather than receive it in the (telephone dealing). Calls cost 10p per minute plus network default currency of sterling. charges. Lines are open 8.00 am – 4.30 pm Mon – Fri. You can access general shareholder information and personal shareholding details from our registrar’s website. Our ShareGift registrar provides a share portal through which you can view Shareholders with a small number of shares, the value of up to date information and manage your shareholding. You can which makes it uneconomical to sell, may wish to consider register for this service via www.capitashareportal.com. You will donating them to charity through ShareGift, a registered charity require your unique holder code, which can be found on your (charity no. 1052686). Further information is available by visiting share certificate or dividend tax voucher, to register for the www.sharegift.org or by telephoning ShareGift on 020 7930 3737. share portal service or to access other information from the registrar’s website. Key dates Date payable Beneficial owners of shares who have been nominated Financial calendar by the registered holder of those shares to receive information Dividend and interest payments rights under section 146 of the Companies Act 2006 are required Ordinary shares: to direct all communications to the registered holder of their final 2013 May shares, not to the Company’s registrar, Capita Registrars, or to interim 2014 November the Company. 5% cumulative preference shares February and August

Date announced Announcement of Group results Half year result August Annual results March Report and accounts Posted March Interim Management Statements April and November 151

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Financial statements Warning to shareholders – boiler room share scams 93 Independent Auditor’s Report to Share fraud includes scams where investors are called out of the members of BBA Aviation plc the blue and offered shares that often turn out to be worthless 96 Consolidated Income Statement or non-existent, or offered an inflated price for shares that 97 Consolidated Statement of investors already own. These calls come from fraudsters Comprehensive Income operating in “boiler rooms” that are mostly based abroad. 98 Consolidated Balance Sheet BBA Aviation plc is aware that, in common with other companies, 99 Consolidated Cash Flow a small number of our shareholders have received unsolicited Statement telephone calls concerning their investment in the Company, 100 Consolidated Statement of Changes in Equity which may have been from fraudsters. 101 Accounting Policies of the Group Callers can be very persistent and extremely persuasive. 106 Notes to the Consolidated Shareholders are advised not to give details of their e-mail Financial Statements addresses or other personal details to any third party that 141 Company Balance Sheet they do not know. Further information can be found on the 142 Accounting Policies of Company’s website at www.bbaaviation.com under investors the Company and shareholder information. 144 Notes to the Company Financial Statements Registered office 149 Principal Subsidiary and Associated Undertakings 105 Wigmore Street London W1U 1QY 150 Five Year Summary Telephone: 020 7514 3999 151 Shareholder Information Fax: 020 7408 2318 http://www.bbaaviation.com web enquiries to: [email protected] Registered in England Company number: 53688

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BBA complete.indb 152 12/03/2014 12:45 This Annual Report is addressed solely to members of BBA Aviation plc as a body. Neither the Company nor its directors accept or assume responsibility to any person for this Annual Report beyond the responsibilities arising from the production of this Annual Report under the requirements of applicable English company law. Sections of this Annual Report, including but not limited to the Strategic Report, Directors’ Report and Directors’ Remuneration Report may contain ‘forward-looking statements’ about certain of BBA Aviation plc’s current plans, goals and expectations relating to future financial condition, performance, results, strategy and objectives including, without limitation, statements relating to: future demand and markets of the Group’s products and services; research and development relating to new products and services; liquidity and capital; and implementation of restructuring plans and efficiencies. Statements containing the words: ‘believes’, ‘intends’, ‘targets’, ‘estimates’, ‘expects’, ‘plans’, ‘seeks’, and ‘anticipates’ and any other words of similar meaning are forward-looking. These ‘forward-looking statements’ involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future which may be beyond BBA Aviation plc’s control. Accordingly, actual results may differ materially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changes in interest and exchange rates, commodity prices and other economic conditions; negotiations with customers relating to renewals of contracts and future volumes and prices; events affecting international security, including global health issues and terrorism; changes in regulatory environment; and the outcome of litigation. The Company undertakes no obligation to update or revise any forward-looking statement in this document or any other forward-looking statements it may make, whether as a result of new information, future events or otherwise. Pages 1 to 91 inclusive consist of a Strategic Report, Directors’ Report and Directors’ Remuneration Report that have been drawn up and presented in accordance with and in reliance upon applicable English company law and the liabilities of the directors in connection with that report shall be subject to the limitations and restrictions provided by such law.

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Registered Office 105 Wigmore Street London, W1U 1QY Telephone +44 (0)20 7514 3999 Fax +44 (0)20 7408 2318

Registered in England Company number: 53688 www.bbaaviation.com