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BBA has high hopes for Landmark, but weakness remains

BBA is hoping its new acquisition can add a turbo boost to its already successful Signature business
March 4, 2016

Last year BBA Aviation (BBA) snapped up a company called Landmark Aviation: a fitting name, given management's bullish claims that the acquisition will "fundamentally transform" the business. It certainly has had a 'landmark' impact on this year's earnings per share, given the dilutive impact of the $1.1bn rights issue launched in October 2015 to fund the acquisition. So what looks like a rotten set of figures is actually, in management's words, "satisfactory".

IC TIP: Sell at 194p

Ignoring the $1.1bn rights issue, earnings per share would have risen 1 per cent to 30.9¢, while the dividend per share would have increased by 5 per cent to 17¢. BBA's flight support division, which operates under the Signature brand, generates 73 per cent of group profits and saw underlying profits rise by a fifth to $158.5m, as good operational performance offset lower revenues. The addition of Landmark will only augment the division's importance.

After-market services, which include its engine repair business, continue to be an issue. Underlying operating profits there dropped by a third and management flagged further cost cuts.

Analysts at Liberum expect adjusted pre-tax profits of $256m in the 2016 financial year, leading to EPS of 20.2¢, compared with $170m and 20.1¢ in 2015.

BBA AVIATION (BBA)
ORD PRICE:194pMARKET VALUE:£2bn
TOUCH:194p-194.3p12-MONTH HIGH:254pLOW: 150p
DIVIDEND YIELD:4.9%PE RATIO:24
NET ASSET VALUE:211¢*NET DEBT:30%

Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)**Dividend per share (¢)**
2011**2.1416423.09.9
2012**2.1812516.410.4
2013**2.2214520.510.9
2014**2.2915217.411.5
2015**2.1395.38.29.6
% change-7-37-53-17

Ex-div: 7 Apr

Payment: 20 May

*Includes intangible assets of $1.15bn, or 112¢ a share £1=$1.41

**Adjusted for 2015 six-for-five rights issue at 133p