BBA Aviation, the world’s leading provider of service bases for business jets, maintained its underlying profits last year and is paying an unchanged dividend despite the increasing problems sweeping through the private aviation sector.
The results exceeded market expectations, and the share price jumped in early trading on Thursday by 10¼p or 16 per cent to 72¾p. The group had been expected by analysts to cut its final dividend.
Simon Pryce, chief executive of the UK-listed group which gains 80 per cent of its sales in North America, said its markets remained “volatile with limited visibility.” He warned the group faced “a difficult year.”
It has recently taken actions to reduce annual costs by £10m a year including cutting 350 jobs. Last year it cut costs by £6m including the elimination of 300 jobs. It has closed two small loss-making businesses.
Capital expenditure had been reduced and the group was focusing on cash generation and debt reduction, said Mr Pryce. Most of its bank debt was committed to 2012 - it had banking facilities of $1.175bn at the end of the year of which $860m was drawn.
BBA was maintaining its full year dividend at 7.6p a share, reflecting the group’s confidence in its long term prospects and its “ability to perform robustly” in present difficult markets, said Mr Pryce.
Group revenues rose last year by 18 per cent from £979m to £1.156bn, thanks largely to the strength of the US dollar and the high oil price. Turnover grew organically by one per cent.
BBA’s underlying pre-tax profits rose by three per cent from £86.4m to £89.2m, but reported pre-tax profits fell by 24 per cent from £110.8m to £84.2m, largely due to the inclusion in the prior year of £38.4m of profits from the sale of Oxford airport in the UK. Reported earnings per share fell 28 per cent from 21.2p to 15.3p.
BBA has maintained its underlying profits despite the weakness of many of its markets in both private and commercial aviation, where it provides airport ground services including refuelling and de-icing.
The downturn in flight support services was offset by the stronger performance of after market services and systems business in areas such as engine repair and maintenance of legacy aircraft components.
BBA’s largest division, the Signature corporate jet service bases, has signed a new five-year contract in the US with NetJets, its biggest customer and the leading operator of business jets through fractional ownership schemes.
The global economic crisis is sharply reducing flying activity by corporate jets and other private aircraft, and BAA said the decline accelerated in the last three months of 2008. Flights fell by 12 per cent in Signature’s US markets last year and its fuelling volumes dropped by nine per cent.
The group acquired eight more fixed base operations last year including six in the US and two in Europe at London Gatwick and Munich airports. The expansion took its network to 95 locations worldwide including 58 in the US, 22 in Europe, one in Cape Town, South Africa and minority interests in 13 bases in South America and one in Hong Kong.