Annual Report 2010 in PDF - BBA Aviation

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Financial statements 85 Independent Auditor’s Report to the Members of BBA Aviation plc in Respect of the Consolidated Financial Statements 86 Consolidated Income Statement 87 Consolidated Statement of Comprehensive Income 88 Consolidated Balance Sheet 89 Consolidated Cash Flow Statement 90 Consolidated Statement of Changes in Equity 91 Accounting Policies of the Group 95 Notes to the Consolidated Financial Statements 126 Independent Auditor’s Report to the Members of BBA Aviation plc in Respect of the Parent Company Financial Statements 127 Company Balance sheet 128 Accounting Policies of the Company 129 Notes to the Company Financial Statements 134 Principal Subsidiary Undertakings 135 Five Year Summary 136 Shareholder Information 94 — Consolidated Financial Statements Accounting Policies – continued Leases Where assets are fnanced by lease agreements that give rights similar to ownership (fnance leases), the assets are treated as if they had been purchased and the leasing commitments are shown as obligations to the lessors. The capitalisation values of the assets are written of on a straight-line basis over the shorter of the periods of the leases or the useful lives of the assets concerned. The capital elements of future leases are recorded as liabilities, while the interest elements are charged to the income statement over the period of the leases to produce a constant rate of charge on the balance of capital payments outstanding. For all other leases (operating leases) the rental payments are charged to the income statement on a straight-line basis over the lives of the leases. Inventory Inventory is stated at the lower of cost and net realisable value. Cost comprises the cost of raw materials and an appropriate proportion of labour and overheads in the case of work in progress and fnished goods. Cost is calculated using the frst in f rst out method in the Flight Support segment, and weighted average method in the Aftermarket Services and Systems segment. Provision is made for slow moving or obsolete inventory as appropriate. Taxation The charge for taxation is based on the proft for the year and takes into account taxation deferred due to temporary dif erences between the treatment of certain items for taxation and accounting purposes. Current tax is calculated at tax rates which have been enacted or substantially enacted at the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on diferences between the carrying amounts of assets and liabilities in the fnancial statements and the corresponding tax bases in the computation of taxable proft, and is accounted for using the balance sheet liability method. No provision is made for temporary dif erences on unremitted earnings of foreign subsidiaries, joint ventures or associates where the Group has control and the reversal of the temporary diference is not foreseeable. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suf cient taxable profts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at tax rates which have been enacted or substantially enacted at the balance sheet date and that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Critical Accounting Judgements and Key Sources of Estimation Uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signifcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fnancial year, are discussed below. The judgements used by management in the application of the Group’s accounting policies in respect of these key areas of estimation are considered to be the most signifcant. Impairment of goodwill, intangible and tangible f xed assets Determining whether goodwill, intangible or tangible fxed assets are impaired requires an estimation of the value in use of the cashgenerating units to which the goodwill has been allocated or the individual assets. The value in use calculation requires the entity to estimate future cash fows expected to arise from the cash-generating unit or asset and a suitable discount rate in order to calculate present value. The carrying amount of goodwill, intangible and tangible fxed assets at the balance sheet date was £485.0 million, £95.0 million and £327.5 million respectively. Details regarding the goodwill and tangible fxed asset carrying value and assumptions used in carrying out the impairment reviews are provided in notes 8 and 9. Pensions and other post-retirement benef ts Determining the present value of future obligations of pension and other post-retirement beneft schemes requires an estimation of future mortality rates, future changes in employee benefts and length of service. These assumptions are determined in association with qualifed actuaries. The net pension liability related to def ned benef t type schemes at the balance sheet date was £34.1 million. Details regarding the carrying value and assumptions used in arriving at the carrying values are provided in note 19. Taxation As part of the process for preparing the Group’s f nancial statements, management is required to calculate income tax accruals. This process involves estimates of the current tax exposures together with assessing temporary diferences resulting from difering treatment of items for tax and accounting purposes. These diferences result in deferred tax assets and liabilities, which are included in the balance sheet. As at 31 December 2010, the Group had a corporate tax liability of £50.3 million (2009: £45.6 million). While the Group aims to ensure the accruals for its tax liabilities are accurate, the process of agreeing tax liabilities with the tax authorities can take several years. Management judgement is therefore required in determining the provision for income tax and the recognition of deferred tax assets and liabilities; however, the actual tax liabilities could difer from the amounts accrued. As at 31 December 2010, the Group had a net deferred tax liability of £42.2 million (2009: £29.9 million). Provisions The Group exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities (see note 25 to the consolidated f nancial statements). Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the fnancial settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be dif erent from the originally estimated provision.
Notes to the Consolidated Financial Statements 1. Segmental information IFRS 8 requires operating segments to be identifed on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. The Group provides information to the Chief Executive on the basis of components that are substantially similar within the segments in the following aspects: — the nature of the long-term f nancial performance — the nature of the products and services — the nature of the production processes — the type of class of customer for the products and services — the nature of the regulatory environment Based on the above, the primary reportable segments of the Group have been deemed to be Flight Support, which comprises Signature Flight Support and ASIG, and Aftermarket Services and Systems, which comprises Engine Repair and Overhaul, Legacy and APPH. The components of these two segments are deemed to be the primary segments of the Group. The businesses within the Flight Support segment provide refuelling, ground handling and other services to the business, general and commercial aviation markets. The businesses within the Aftermarket Services and Systems segment maintain, manufacture and support engines and aerospace components, sub-systems and systems. Sales between segments are immaterial. Flight Aftermarket Services & Unallocated Total Business Segments Support £m Systems £m Total £m Corporate £m Continuing £m 2010 External revenue 741.6 441.4 1,183.0 – 1,183.0 Underlying operating profit 73.4 48.0 121.4 (10.8) 110.6 Exceptional items (5.3) (4.3) (9.6) (0.6) (10.2) Segment result* 68.1 43.7 111.8 (11.4) 100.4 Underlying operating margin 9.9% 10.9% 10.3% – 9.3% * Segment result includes £1.1 million proft of associates within Flight Support. Other information Capital additions* 9.8 13.0 22.8 – 22.8 Depreciation and amortisation 29.7 12.3 42.0 0.2 42.2 * Capital additions represent net cash expenditures in the year. Balance sheet Total assets 790.2 459.3 1,249.5 118.2 1,367.7 Total liabilities (114.8) (98.5) (213.3) (672.0) (885.3) Net assets 675.4 360.8 1,036.2 (553.8) 482.4 Consolidated Financial Statements — 95
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Annual Report 2010
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Directors’ Report 2 Overview 2 Gr
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Group Structure Revenue by business
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Revenue Revenue increased by 4% on
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Corporate Governance The Board beli
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Michael Harper (66) Chairman Simon
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Worldwide Business Jet and Turbopro
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Commercial Aviation Our commercial
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Each of the fve businesses has a cl
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Principal Risks and Risk Potential
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Return on Invested Capital (ROIC) M
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Proft before tax increased by 42% t
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Financial Summary 2010 2009 Inc/(de
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ASIG United States of America, Cari
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Directors’ Report — 27
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Revenue 2010 2009 Inc/(dec) 20091 I
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ASIG Focused on growth 32 — Direc
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Key Facts ASIG is a world leading i
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London Heathrow: the A380 is a doub
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Financial Summary 2010 2009 Inc/(de
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Legacy Support United States of Ame
Page 45 and 46: Directors’ Report — 43
Page 47 and 48: Revenue 2010 2009 Inc/(dec) 20091 I
Page 50 and 51: Legacy Support Flexible resources m
Page 52 and 53: Key Facts Legacy Support is a leadi
Page 54 and 55: Houston, Texas: a Legacy Support st
Page 56 and 57: APPH Delivering continuous improvem
Page 58 and 59: Key Facts APPH has a niche focus an
Page 60: Runcorn, UK: a Jas39 Gripen nose la
Page 63 and 64: CSR leadership Group-wide Providing
Page 65 and 66: The Group also launched its new par
Page 67 and 68: A signifcant proportion of our debt
Page 69 and 70: Suppliers Payment Policy Substantia
Page 71 and 72: The Board has a formal schedule of
Page 73 and 74: a. Remuneration Committee Compositi
Page 75 and 76: Guidance on Audit Committees. The A
Page 77 and 78: Directors’ Remuneration Report I
Page 79 and 80: The following chart shows the balan
Page 81 and 82: d. Longer-term performance incentiv
Page 83 and 84: Annualised total shareholder return
Page 85 and 86: e. Pension: policy and implementati
Page 87 and 88: Independent Auditor’s Report to t
Page 89 and 90: Consolidated Statement of Comprehen
Page 91 and 92: Consolidated Cash Flow Statement Op
Page 93 and 94: Accounting Policies Basis of Accoun
Page 95: Property, Plant and Equipment Prope
Page 99 and 100: 2. Proft for the year Proft for the
Page 101 and 102: 5. Dividends On 21 May 2010, the 20
Page 103 and 104: 8. Intangible assets - continued Th
Page 105 and 106: 10. Investments in associates Cost
Page 107 and 108: 13. Trade and other payables Amount
Page 109 and 110: 16. Bank overdraft and loans - cont
Page 111 and 112: 17. Derivative fnancial instruments
Page 117 and 118: 19. Pensions and other post-retirem
Page 119 and 120: 19. Pensions and other post-retirem
Page 121 and 122: 21. Share capital and reserves Allo
Page 123 and 124: 21. Share capital and reserves - co
Page 125 and 126: 23. Cash fow from operating activit
Page 127 and 128: 26. Related party transactions Tran
Page 129 and 130: Company Balance Sheet 2010 2009 Not
Page 131 and 132: Leases Where assets are f nanced by
Page 133 and 134: 6. Creditors: amounts falling due w
Page 135 and 136: 10. Capital and reserves Details of
Page 137 and 138: Five Year Summary 2010 2009 2008 20
Page 139 and 140: This Annual Report is addressed sol
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