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Article Excerpt
SIMON PRYCE, CEO, BBA AVIATION PLC: Well, ladies and gentlemen, good morning. And welcome to the preliminary results presentation for BBA Aviation for the year ended December 31, 2008. As usual, we will be the subject of a webcast this morning, as will the questions, if you have any, that will follow.
And, before I get into the full proceedings of the morning, I'd just like to introduce the audience to the Operational Chief Executives from BBA Aviation who are here today. If I may, I'll ask them to stand up just so you can spot them so you can nab them later with all those really difficult questions you don't want to ask me. We have Keith Ryan, who runs our Commercial Aviation Services business, ASIG.
KEITH RYAN, PRESIDENT AND COO, ASIG, BBA AVIATION PLC: Good morning.
SIMON PRYCE: Michael Scheeringa, who has recently joined us to run Signature. Hugh McElroy, who runs our Engine Repair and Overhaul business, and who has broken his foot, so that was quite a strenuous thing for him to do. Jim Gerwien, who runs our Legacy Support business. And finally, last but not least, Dave Haslam, who runs our APPH, Landing Gear and Hydraulics Systems business.
We'll follow the usual agenda this morning, although as a slight departure from the norm in this somewhat challenging environment, I will try and give you a bit of an overview of what we see going on in our market place. And we will try and run through the presentation in around 40 minutes to leave plenty of time at the end for questions.
So I'm pleased to be able to report on what I think are a very positive set of results for BBA Aviation. Building on our solid first half, we continued good, strong performance in the second half despite challenging markets. We ended the year with revenues at GBP1.1b, up 18%. And up 4% on a constant fuel and constant currency basis. Operating profits at GBP109.7m were up 4% also. And the -- the EPS at 16.1p, up 5%.
We made excellent progress in our Aftermarket Services and Systems divisions, which now represent over 46% of the Group by profit. Despite very challenging trading conditions, particularly in the second half, we saw good and solid performance from Flight Support.
Pleasingly, excellent and strong cash generation and cash conversion at over 100%. And this has happened partly as a result of the proactive management actions that we've taken during the course of 2008, and continue to do as we enter 2009 to deal with the somewhat uncertain environment in which we trade today.
And finally, reflecting the ongoing cash generative nature of our businesses and the long-term prospects that we think they have, we have maintained the full year dividend.
I think this shows that BBA Aviation is proving to be very robust into this downturn. We do have market leading businesses. We are very much a support service and after market focused Group. We're very well positioned. Each of our businesses has scale and strong barriers to entry. We have some portfolio and cyclical and geographical balance within our Group of five companies, all of which have relatively low operational gearing. And, in 2008, and as we enter 2009, we have plenty of financial flexibility to deal with whatever the market may throw at us.
The management actions that I've -- that I've referred to, which we pro-actively undertook during the course of 2008, and have continued into 2009, are painful but important. The majority of our employees are direct employees who are employed in service organizations, and we're used to flexing our direct labor to deal with changes in revenue.
However, in addition to the usual flexing that we do, in 2008 we took out 300 structural heads. We'll take out another 350 in 2009, and the majority of those have already been done. We've closed two small loss making businesses in the UK, CSE Engineering and APPH Wheels and Brakes. And, indeed, have ceased our glycol recovery operations in ASIG in the US.
We've implemented, as you would expect us to do, an indirect and discretionary spend reduction program, which has proved to be very successful and is ongoing. And we've continued to focus on cash generation, building on two years of looking hard at how to optimize the amount of capital we invest in our business, and generate cash from it.
We saw a net inventory reduction, despite the revenue increase of GBP10m in 2008, and there's more to come there. And we reduced CapEx in the second half to GBP9m, and there's further annual reductions going on there.
Taken together, the actions that we took in 2008 reduced our underlying costs base of some -- by some GBP6m on an annualized basis, of which we realized GBP3m, although that was partly offset, particularly in the first half, by some input cost inflation which has now normalized.
The actions we have already taken, or plan to take in 2009, will generate a further set of annualized cost savings of GBP10m, and the majority of that will be realized this year.
So, it's been a busy year for us. And, despite all the operational stuff we've been doing, I'm pleased to report on the good, continuing strategic progress. Our businesses are executing the detailed strategic plans that we put in place over the last 18 months.
Signature has executed a new five year preferred supply agreement with its largest customer, NetJets, in the US. And has acquired nine FBO's which add eight important locations to our global network.
In Legacy Support, we've had a number of significant new license acquisitions. We've established a UK presence. And, particularly, the Honeywell 7 -- 700 Series APU represents a step change both in scale and in terms of technical capability for our Legacy Support Group.
And, not to forget ASIG, ERO and APPH all continue to make good strategic progress.
Our performance driven culture, which was put in place at the time we de-merged Fiberweb and turned from a financial holding company into a focused aviation services and system support group, is very much responsible for continuing to focus the businesses on driving sustainable value creation.
All the businesses have a common set of priorities, and we measure performance against those priorities. This has resulted in both the managements and the businesses who are focusing very hard on cash generation and driving return on invested capital. And I'm pleased to be able to report on a number of significant improvements in that area during the course of 2008.
And almost as importantly for me, the key performance indicators that we look at, which are non-financial in nature, are also showing good improvement, particularly in areas like health and safety, which are important for the sustainability of our business and also, indirectly, have a financial impact of us -- on us in the future.
Finally, you will have seen that we have made a number of organizational changes to support our strategic plans and our operational focus. And we have also appointed Bruce Van Allen - Bruce, you might just want to stand up in case people have forgotten who you are -- to the role of Group Marketing Director. A new role for us as we increasingly see cross-business opportunities and...
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