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BBA Aviation fuels up for the future

The company has put its flight support business front and centre
March 3, 2017

BBA Aviation (BBA) claimed a year ago that its acquisition of aviation services provider Landmark would mark a fundamental change for the company, and management is sticking to its guns, hailing a "transformational" year. The acquisition has been completed ahead of plan and cost synergies for 2017 are now expected at $39m (£32m), from the $35m estimated at the time of the deal. Still, a $184m impairment against its struggling engine repair business wiped out pre-tax profits.

IC TIP: Hold at 305p

The flight support business, which includes Landmark, now comprises 88 per cent of underlying operating profit for the group. Continuing revenues for the division grew 55 per cent on the back of acquisitions, which contributed $546m. Its pre-existing business, Signature, grew its top line by 5 per cent in the year, ahead of market growth of just 1-2 per cent. It now has 203 locations globally.

Efforts to reduce debt have focused on asset sales. In June 2016, the group used $187m generated by the sale of six fixed base operators to pay down debt. The sale of ground services provider ASIG to John Menzies (MNZS), completed last month, will deliver another $170m after tax, transaction fees and other costs.

Analysts at JP Morgan Cazenove forecast profit before tax of $183.1m, giving adjusted EPS of 22.8¢ in 2017 (from $82.2m and 19.2¢ in 2016).

BBA AVIATION (BBA)
ORD PRICE:312.6pMARKET VALUE:£3.22bn
TOUCH:312.6-312.812-MONTH HIGH:315pLOW: 186p
DIVIDEND YIELD:3.3%PE RATIO:na
NET ASSET VALUE:186¢*NET DEBT:70%

Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2012**2.1812516.410.40
2013**2.2214520.510.90
2014**2.2915217.411.50
2015 (restated)1.7177.49.812.15
20162.15-82.2-1.912.75
% change+26-206-119+5

Ex-div: 6 Apr

Payment: 19 May

*Includes intangible assets of $2.49bn, or 242¢ a share £1=$1.23

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