BBA Aviation plc plc BBA Aviation Registered Offi ce 20 Balderton Street London, W1K 6TL Telephone +44 (0)20 7514 3999 Annual Report 2009 Fax +44 (0)20 7408 2318 Annual Report 2009 Registered in England Company number: 53688 www.bbaaviation.com 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 the Directors’ Report and Directors’ Remuneration Report contain forward-looking statements 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. 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. 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 renewal 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 publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Pages 3 to 60 inclusive consist of a 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. Designed by sasdesign.co.uk Photography by © Mark Power/Magnum Photos Board Photography by © Noorie Parvez Covers and pages 1-40 are printed on Marazion Ultra paper. Marazion Ultra is produced using chemical woodfree pulp, it is manufactured at a mill that is certified to ISO14001 environmental management standards .The pulp is bleached using Chlorine Dioxide and not Chlorine gas. This production method produces Elemental Chlorine Free (ECF) pulp which is less harmful to the environment. The inks used are all vegetable oil based. Pages 41-104 are printed on Tauro Offset paper. Tauro Offset is fully recyclable and biodegradable, produced at a mill that holds ISO14001 standard for environmental management. Printed at St Ives Westerham Press Ltd, ISO14001 certified and CarbonNeutral® Financial Highlights 3 Directors’ Report 4 Chairman’s Statement 4 Business Review 6 Our Marketplace 6 Our Locations 10 Our Strategy 12 Principal Risks and Uncertainties 12 Group Financial Summary 13 Flight Support 14 Signature 16 ASIG 20 Aftermarket Services and Systems 24 Engine Repair and Overhaul 26 Legacy Support 30 APPH 34 Corporate Social Responsibility 38 Board of Directors and Executive Management 40 Financial Matters 42 Additional Disclosures 44 Directors’ Corporate Governance Statement 46 Directors’ Remuneration Report 52 Going Concern and Statement of Directors’ Responsibilities 60 Consolidated Financial Statements 61 Independent Auditors’ Report 61 Consolidated Income Statement 62 Consolidated Balance Sheet 63 Consolidated Cash Flow Statement 64 Consolidated Statement of Comprehensive Income 65 Consolidated Statement of Changes in Equity 65 Accounting Policies 66 Notes to the Consolidated Financial Statements 69 Company Financial Statements 95 Independent Auditors’ Report 95 Company Balance Sheet 96 Accounting Policies 96 Notes to the Company Financial Statements 98 Principal Subsidiary Undertakings 102 Five Year Summary 103 Shareholder Information 104 Industry acronyms ACJ Airbus Corporate Jetliner CRO Component Repair and Overhaul OEM Original Equipment Manufacturer AWARS Authorised Warranty and Repair Station ERO Engine Repair and Overhaul RIR Recordable Incident Rate APU Auxiliary Power Unit FBO Fixed Base Operation RTC Regional Turbine Centre BBJ Boeing Business Jet GSE Ground Support Equipment VLJ Very Light Jet B&GA Business and General Aviation MRO Maintenance Repair and Overhaul Front cover: a customer’s Cessna Excel is refuelled at Palm Springs, one of Signature’s global network of FBOs 01 BBA Aviation is a leading global aviation support and aftermarket services provider. Our businesses are well positioned in markets with long-term growth prospects. They strive to continuously improve their service and product offerings and work to exceed customer expectations. With customers, technologies, know-how and support services in common, our businesses consistently look for ways of working together for greater gain. Our people are the foundation of our success. We aim to be an employer of choice, acting with integrity and respect, in a safe and sustainable working environment and empowering our employees to deliver exceptional performance. This focus is core to our overarching objective of delivering exceptional, long-term, sustainable value to all our stakeholders. Revenue Underlying Operating Profi t* Earnings per Share† £1,080.8m £100.5m 14.6p £m (other than percentage and per share amounts in pence) 2009 2008 change Revenue 1,080.8 1,156.1 (7)% Underlying EBITDA** 139.3 143.3 (3)% Underlying operating profit* 100.5 109.7 (8)% Operating profit 82.3 104.7 (21)% Underlying operating margin 9.3% 9.5% Net interest (22.3) (20.5) Underlying profit before tax 78.2 89.2 (12)% Exceptional items (18.2) (5.0) Profit before tax 60.0 84.2 (29)% Profit for the period 45.5 62.9 (28)% Earnings per ordinary share Basic Adjusted† 14.6p 16.1p (9)% Unadjusted 11.4p 15.3p (25)% Diluted Adjusted† 14.4p 16.0p (10)% Unadjusted 11.3p 15.2p (26)% Dividends per ordinary share 7.6p 7.6p – Cash generated by operations 190.4 143.0 33% Free cash flow*** 137.5 77.2 78% Net debt (391.6) (554.4) Net debt to EBITDA**** 2.8x 2.9x * operating profi t before exceptional items ** underlying operating profi t before depreciation and amortisation *** cash generated by operations plus dividends from associates, less tax, interest, preference dividends and net capital expenditure (excluding expenditure on Ontic licences) **** in 2008 net debt was translated at average exchange rates for the purpose of this calculation, in accordance with the Group’s covenant calculation methodology for its bank facilities † earnings per share before exceptional items The defi nitions as outlined above are consistently applied throughout the fi nancial statements. Directors’ Report 03 Chairman’s Statement As expected, BBA Aviation delivered a strong relative performance in 2009 despite the continued cyclical downturn in our major markets. We have made good underlying progress and have managed our cost base eff ectively to improve our underlying operational effi ciency and to limit the impact of volume declines on fi nancial performance. We have clearly demonstrated the fl exibility and strongly cash generative nature of BBA Aviation and materially reduced our net debt. The Group is well positioned to benefi t from a cyclical upturn and we remain confi dent about the outlook and attractive secular growth prospects for our markets. Results I am pleased to report that, as we expected, BBA Aviation has delivered a strong relative performance in 2009 despite the continued cyclical downturn in our major markets. We have made good underlying progress with market share gains, contract wins and new authorisations. We have managed our cost base eff ectively to improve our underlying operational effi ciency and to limit the impact of volume declines on fi nancial performance. Revenue for 2009 fell by 7%, with our businesses impacted by the diffi cult economic climate. However, we continued to outperform the market with an organic revenue decline (excluding the impact of exchange rates, fuel prices and acquisitions and disposals) of 10%, which contrasts with market reductions of 19% in US business and general aviation activity and 14% in US commercial activity. Underlying operating profi t of £100.5 million was 8% lower (2008: £109.7 million) with the impact of the fall in revenue largely off set by cost reduction initiatives and movements in exchange rates. Adjusted earnings per share were 14.6p (2008: 16.1p). The key area of focus in 2009 was cash generation and the reduction of net debt. We have clearly demonstrated the strongly cash generative nature of BBA Aviation with free cash fl ow up 78% to £137.5 million (2008: £77.2 million) due principally to a working capital infl ow of £57.9 million (2008: £3.8 million) and reduced capital expenditure of £18.7 million (2008: £30.9 million). Net debt was reduced to £391.6 million (2008: £554.4 million), including a foreign exchange gain of £55.6 million. The attention to cost control and debt reduction has ensured that despite the market downturn and lower activity levels, the Group’s leverage ratio (net debt to EBITDA) improved in the year to 2.8 times (2008: 2.9 times). 04 We took signifi cant action in the second half of 2008 and fi rst half of 2009 to address the cost base of the business. These cost reduction initiatives related primarily to headcount reduction, as well as the tight control of all discretionary spending. These actions contributed approximately £25.0 million of savings in 2009 and the incremental benefi t of these savings is expected to be approximately £5.0 million in 2010. Dividend A fi nal dividend of 5.3p has been recommended by the Board (2008: 5.3p) leaving the dividend for the full year unchanged at 7.6p. Board and Employees In January 2010 it was announced that Andrew Wood will be retiring as Group Finance Director with eff ect from 29 April 2010.