BBA Aviation plc 2013 Final Results Results for the year ended 31 December 2013 For further information please contact: Mark Hoad, Group Finance Director (020) 7514 3999 Jemma Spalton, Head of Investor Relations BBA AVIATION PLC David Allchurch / Christian Cowley (020) 7353 4200 TULCHAN COMMUNICATIONS A video interview with Simon Pryce, CEO and Mark Hoad, FD is now available on www.bbaaviation.com and www.cantos.com A live audio webcast of the analyst presentation will be available from 09:00 today on www.bbaaviation.com and www.cantos.com FINAL RESULTS FOR PERIOD ENDED 31 DECEMBER 2013 Results in brief ($m) Underlying results1 Statutory results 2013 2012 % Change 2013 2012 % Change (restated)2 (restated)2 Revenue 2,218.6 2,178.9 2% 2,218.6 2,178.9 2% EBITDA 261.6 253.2 3% 239.9 228.1 5% Operating profit 200.1 192.7 4% 169.4 160.0 6% Profit before tax 170.5 157.8 8% 145.2 125.1 16% Earnings per share 3 30.5¢ 27.9¢ 9% 28.9¢ 23.1¢ 25% Return on invested capital4 10.0% 9.8% Free cash flow5 146.5 121.2 21% Net debt 478.5 416.4 Dividend per share 15.40¢ 14.65¢ 5% (1) Before exceptional items (as defined in the condensed consolidated financial statements). (2) Restatement for IAS19 Revised as set out in Note 1 to the condensed consolidated financial statements. (3) Basic earnings per share. (4) Underlying operating profit return on average invested capital including goodwill and intangibles amortised or written off to reserves. (5) Cash generated by operations, plus dividends from associates, less tax, net interest and net capital expenditure. These definitions as outlined above are consistently applied throughout this results announcement. Industry leading businesses Good results in broadly flat markets Positive financial performance with 2% revenue growth, underlying profit before tax up 8% and EPS up 9% Continued strong cash conversion of 101% and a 21% increase in free cash flow ROIC progression despite continued investment for long-term growth Group’s strategic focus enhanced by value creative disposal of APPH for $128 million Good performance Flight Support (53% of Group EBIT) Organic revenue growth of 4%, underlying operating profit increase of 5% Signature: continued market outperformance and network expansion, good progress on key investment projects ASIG: costs incurred to address service levels led to improved operational performance in the second half and significant new contract wins post year end Aftermarket Services and Systems (47% of Group EBIT) Organic revenue reduction of 2%, underlying operating profit up 2% ERO: weaker than anticipated revenue, partially offset by operational improvements, structural cost reduction programme launched Legacy Support: revenue increased 14%, major contracts completed Growth and value creation $150m of strategic investments made or committed in 2013 o Four acquisitions in Flight Support including three FBO acquisitions o Six new licences signed across multiple OEMs In 2014, FBO acquisitions in Biggin Hill and Detroit, the expansion of ASIG fuelling activities in North America via $16.8 million Skytanking acquisition and a new Legacy licence from Rolls Royce Strong cash conversion supporting on-going creation of significant investment capacity $125 million share repurchase programme launched to return APPH disposal proceeds to shareholders Simon Pryce, BBA Aviation Chief Executive Officer, commented: “BBA Aviation produced another good performance in 2013, despite the low growth environment. Profit before tax was up 8% and earnings per share up 9%, driven in particular by Signature and Legacy, although ERO was weaker than anticipated. We also made strong strategic progress, with $150m of strategic investments across both divisions, the disposal of APPH and the planned return of $125m to shareholders. 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.” 2 BBA Aviation plc – Final Results, 5 March 2014 FINAL RESULTS 2013 Overview BBA Aviation has made good progress in 2013 as expected, delivering further market outperformance and an improvement in key operating metrics, as well as continuing effectively to execute the Group’s growth strategy. Group revenue in 2013 of $2,218.6 million increased by 2% compared with the prior year (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 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. There was a $5.3 million reduction in the underlying net interest expense to $29.6 million (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 and previously announced $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 2013 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. 3 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 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. Business Review Flight Support Our Flight Support division provides specialist on-airport support services including refuelling and ground handling to the business & general aviation market through our Signature Flight Support brand and to the commercial aviation market through our ASIG brand.