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BBA Aviation to focus on Signature business

The company will consist solely of its airport services business, Signature, following two disposals
BBA Aviation to focus on Signature business

BBA Aviation (BBA) could soon operate its airport services business Signature on a standalone basis. In July BBA announced the sale of its Ontic business, which provides parts for legacy aerospace platforms, to private equity fund CVC Fund III for an enterprise value of $1.37bn (£1.13bn), or 11.4 times underlying cash profits for 2018. Ontic’s performance was “ahead of expectations” with underlying operating profit growth of nearly a third to $31.7m. The engine repair and overhaul (ERO) business has been classified as discontinued operations, though it increased its underlying operating profit by 40 per cent to $18.8m.

IC TIP: Hold at 303p

Even ahead of these disposals, Signature was already dubbed the core business and generated the bulk of BBA’s revenue. Organic revenue growth of 0.4 per cent was slightly ahead of the wider US business and general aviation (B&GA) market growth rate during the first half. But reduced heavy jet traffic in Signature’s network meant that underlying fixed based operating profit fell 2.6 per cent to $156m, compared with a flat US market overall.

Bloomberg consensus estimates forecast adjusted EPS of 22.1¢ during 2019, increasing to 24.6¢ in 2020.

BBA AVIATION (BBA)   
ORD PRICE:303pMARKET VALUE:£3.13bn
TOUCH:303-303.4p12-MONTH HIGH:327pLOW: 207p
DIVIDEND YIELD:3.9%PE RATIO:37
NET ASSET VALUE:180¢*NET DEBT:72%**
Half-year to 30 JunTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20181.0276.26.54.0
20191.2657.53.04.2
% change+23-25-54+5
Ex-div:12 Sep   
Payment:01 Nov   
*Includes intangible assets of $2.49bn, or 240¢ a share **Does not inclue $1.2bn of lease liabilitiess £1=$1.21