Acquisitions & Placing 2010 Final Results March 2011 2010 - PDF document

Acquisitions & Placing 2010 Final Results March 2011

2010 Highlights 2010 Highlights  Continued recovery in B&GA flying hours  Continued recovery in B&GA flying hours Improving market conditions benefitting Flight Support, and Aftermarket in H2  Market growth and share gain driven revenue Strong performance increases, supported by continuing operational improvement  Driving sustained cash generation and improving  Driving sustained cash generation and improving Maintained capital discipline returns on invested capital  Important investments across both divisions Continued execution of strategy  Maintained through the downturn progressive  Maintained through the downturn, progressive Dividend increase dividend resumed 2

Group Finance Director t Financial Review Financial Review Di Mark Hoad Fi G

Financial Highlights Financial Highlights  Organic revenue growth 4% Organic revenue growth 4% Growth resumed  10% increase in underlying operating profits  Operating profit growth complemented by reduction in interest charge, tax rate maintained i t t h t t i t i d Earnings progression  Adjusted EPS increased 21% to 17.6p  Continued strong cash flow of £115.2m, cash conversion of 124% i f 124% Cash generation  De-levered to 2.1x  Group ROIC up 110bps to 9 5% with both divisions  Group ROIC up 110bps to 9.5%, with both divisions ROIC improvement improving 4

Income statement Income statement £m 2010 2009 Change Change as reported t d constant FX t t FX Revenue 1,183.0 1,080.8 9% 9% Revenue (fuel adjusted (1) ) - 1,124.6 5% 5% Operating Profit (2) fi (2) O i P 110 6 110.6 100 100.5 10% 10% 10% 10% Margin % (2) 9.3% 9.3% - - Margin % (2) (fuel adjusted (1) ) - 8.9% +40bps - Net Interest (15.2) (22.3) 32% 32% Profit Before Tax (2) 95.4 78.2 22% 22% EPS (2) EPS ( ) 17 6p 17.6p 14 6p 14.6p 21% 21% 20% 20% Dividend 8.1p 7.6p 7% - Return on Invested Capital (3) 9.5% 8.4% +110bps - (1) Constant fuel price (2) Pre exceptional items (3) 12 month constant currency average 5

Flight Support Flight Support  Organic revenue Revenue Bridge (£m) i increase of 6% f 6% 40 742 11 44 691 – Signature 8%, 644 3 ASIG 2%  U d Underlying operating l i ti profit up 19% at constant exchange rates 2009 Fx Fuel 2009 Acqs Organic 2010 like for like  Margin of 9.9% up 90 g p basis points on like-for- Operating Profit Bridge (£m) like basis (2009: 9.0%)  Cash conversion 115% 14 73 0 0 1 1 62 62 62 62 (2009: 143%) (2009 143%) (4)  Divisional ROIC 9.7% (2009: 7.9%) 2009 Fx 2009 Acqs Organic Cost 2010 like for like increase 6

Aftermarket Services & Systems Aftermarket Services & Systems  Organic revenue flat for Revenue Bridge (£m) th the year, but up 3% in b t 3% i 0 2 2 439 441 437 H2  Underlying operating profit broadly flat p y  Prior year organic 2009 Fx 2009 Organic Transaction fx 2010 includes engine gains like for (£4.6m OP), net like pensions gain in current i i i t year (£3.0m OP) Operating Profit Bridge (£m)  Operating margins of 49 0 49 3 48 2 10.9% (2009: 11.1%) ( ) (1) (5)  Cash conversion 124% (2009: 218%)  Divisional ROIC 9.1% 2009 Fx 2009 Organic g Cost Trans- Pensions 2010 like for like increases action fx gain (2009: 8.9%) 7

Exceptional items Exceptional items Total exceptional charge £10.2m (2009: £18.2m) Restructuring costs £4.2m (2009: £6.0m)  Primarily relates to closure of APPH’s Bolton landing gear facility and compression of ERO’s Neosho overhaul facility  Prior year costs related to headcount reductions Other operating expenses £2 3m (2009: £nil) Other operating expenses £2.3m (2009: £nil)  2010 acquisition related costs reported in exceptionals due to changes in IFRS 3 Amortisation of acquired intangibles £3.7m (2009: £3.8m)  In line with prior year 8

Cash flow / debt Cash flow / debt £m 2010 2009 Underlying EBITDA 149.1 139.3 Working capital movement 15.9 57.9 Net capital expenditure p p (22.8) ( ) (18.0) ( ) Net interest and tax paid (17.3) (36.1) Exceptional items (4.8) (3.8) All other movements All other movements (4.9) (4 9) (1 8) (1.8) Free Cash Flow 115.2 137.5 Dividends (17.4) (21.9) Acquisitions and disposals (incl. licences) (4.9) (7.4) Other (3.2) (1.0) Net cash flow Net cash flow 89.7 89.7 107.2 107.2 Net Debt 313.9 391.6 Net Debt to EBITDA 2.1x 2.8x 9

Cash flow Cash flow % of C Cash flow item h fl it C Comment t Operating Profit O ti P fit  Driven by market growth and active cost Operating profit 100% management  Capex c. 0.7x-1.2x depreciation Capex – depreciation C d i ti C 0 7 1 2 d i ti -10% to +10% 10% t +10%  Flight Support neutral, Aftermarket modest -10% to 0% Working capital consumption, still some structural opportunity P Pensions i  c. £5-6m per annum over next 3-4 years £ 6 3 4 -5% %  No other major items expected Other 0% Operating cash conversion Operating cash conversion 75% - 105% 75% 105%  Capex growing to 1.0x depreciation as gradual recovery continues  One-off working capital benefits in 2010 likely to reverse in 2011  Pensions and other items as per previous guidance  In line with strategy, $100m of cross-currency swaps closed out in 2011 - £11m cash cost below free cash flow line 10

Placing Placing Rationale  Financing acquisitions announced today for aggregate investment of $80m  Provides flexibility to continue consolidation strategy – strong acquisition pipeline   Enhances our ability to access debt markets Enhances our ability to access debt markets Placing structure  Up to 43.2m shares, representing up to 9.99% of current issued share capital  Eligible for proposed final 2010 dividend of 5.7p Financial impact   Expected gross proceeds of c £95m Expected gross proceeds of c.£95m  Combination of acquisition and placing marginally dilutive to EPS before further investment 11

Strategic & Operational Review Strategic & Operational Review Simon Pryce G Group Chief Executive Chi f E ti

Delivering on the growth potential Delivering on the growth potential B&GA market recovering B&GA market activity based on aircraft movements (US) 1  13th month of year-on-year growth 20% 0%  US still 21% below the 2007 peak -20%  Longer-term correlation to GDP -40% Jun-08 8 9 Jun-09 0 Jun-10 7 Oct-07 7 Dec-07 Mar-08 8 8 Sep-08 8 Dec-08 Mar-09 9 9 Sep-09 Dec-09 9 Mar-10 0 Sep-10 0 Dec-10 0 Consolidation opportunities being realised C  Flight Support USA versus 2007 USA year-on-year – Further extension of FBO network in Europe versus 2007 Europe year-on-year 2010 – FBO market remains fragmented US GDP vs US turbojet hours flown through-cycle 2 – Commercial service bolt on 20 8 opportunities, outsourcing potential CAGR 18 6 6 6 4% 6.4% 6 6% 6.6%  Aftermarket 16 ($bn) 2.7% 2.7% 5 14 (%) – Service and authorisation expansion 12 3 10 2 – Fragmented legacy market with service 8 opportunity opportunity 6 6 0 0 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 – Acquisition of strategically core legacy business Bars: US real GDP ($bn) Line: Estimated Hours Flown (000s) (1) Source: FAA, Eurocontrol (2) ( ) Source: General Aviation Manufacturers Association (Turbo Jet data) ( ) FAA Aerospace Forecasts (Turbo Jet data) Bureau of Economic Analysis (Gross domestic product (GDP) at chained 2005 market prices) 13

Flight Support Flight Support Signature Flight Support – revenue and organic growth  Strong volume recovery St l 500 20%  Improved operational efficiency, 400 10% scale benefits 300 0% 200  Continued market outperformance p -10% 10% 100 0 -20% ASIG H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10  Improved operational efficiency Revenue (fuel adj & constant currency) ( j y) Organic Growth g  Good net new business wins Good net new business wins  Enhanced service offering Flight Support – operating profit and margin  Emerging market expansion 60 20% 40 10% 20 0 0 0% 0% H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 OP (£m, constant currency) Margin (Fuel Adjusted) 14

Aftermarket Services & Systems Aftermarket Services & Systems Engine repair and overhaul Aftermarket Services & Systems – revenue and organic growth   Later cycle returned to growth in H2 Later-cycle, returned to growth in H2 300 20%  Centres of excellence created to 10% 200 enhance operational performance 0% 100  Ongoing management of parts -10% supply constraints 0 -20%  H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 New/renewed authorisations, service extension, emerging market Revenue (£m, fuel adj. & constant currency) expansion expansion Organic Growth (%) g ( ) Legacy Aftermarket Services & Systems – operating profit and margin  Strong H2 supported by process enhancement 40 20%  Positive operational improvements 20 10%  Record order book 0 0% APPH H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10  L t Late cycle, first signs of MRO l fi t i f MRO OP (£m, constant currency) improvement Margin (%, fuel adjusted)  Operational progress and footprint optimisation 15