BBA Group Annual Report 2004 - BBA Aviation

22 BBA GROUP FINANCIAL
ANNUAL REPORT
2004 REVIEW
Acquisitions and Disposals broken down between UK schemes £33 million and
The Group acquired 9 businesses during the year for a total overseas schemes £23 million. Following an actuarial
consideration of £98 million. In Fiberweb we continued to valuation of the UK schemes in 2004, the Board has agreed
invest in the European wipes market with the acquisition to make a special contribution of £10 million spread over two
of Tenotex, which is based in Spain and Italy and further years to reduce the deficit, after which the situation will be
consolidates our position in this growing sector. In Aviation reviewed again. The overseas deficit includes unfunded
we made a number of acquisitions to expand the Signature schemes valued at £11.3 million.
network, particularly in Europe, and we also acquired
businesses for ASIG, our commercial aviation handling Cash Flow and Debt
operation. These businesses, which are detailed in the The Group produced another year of good free cash flows:
Directors’ report, are expected to contribute £120 million of 2004 2003
turnover in 2005 and will generate operating margins of more Cash Flow from Operating Activities 145.4 185.0
than 10 per cent. The fair market value of the acquisitions Dividends from Associates 0.9 2.7
was £17.4 million, debt acquired £7.4 million, and the Capital Expenditure (incl. intangibles) (61.7) (75.0)
resulting goodwill was £73.2 million. Sale of Fixed Assets 5.7 5.2
The Group disposed of the assets of Precision Avionics, Interest and Preference Dividends (17.3) (20.5)
Inc. and closed a Fiberweb distribution business in Japan. Taxation (13.0) (10.2)
Tax and Dividends
Free Cash Flow 60.0 87.2
The effective tax rate was 27 per cent of the profit before The overall performance was lower than in 2003 due in
goodwill amortisation and all exceptional items (2003: particular to the additional cash costs of closing the Millville
27 per cent). facility and a build up of inventory in the US Engine Repair
The Board is recommending a final dividend of 7.95 and Overhaul business of £12 million which should unwind
pence bringing the dividend for the year to 11.3 pence during 2005.
(2003: 10.8 pence), an increase of 5 per cent. The dividend Capital expenditure reduced to £62 million (2003:
is covered 1.7 times by adjusted basic earnings per share £75 million) and was 0.8 times depreciation (2003: 1.0 times).
(2003: 1.9 times). The increase in the dividend reflects the Of the £62 million spent during the year £25 million related
Board’s confidence in the Group’s outlook and the expectation to Materials Technology (2003: £47 million) and £37 million
of continued strong free cash flows in the future. to Aviation (2003: £28 million).
The movement in net debt is shown on the table below:
Pensions 2004 2003
The overall value of our scheme assets has grown to Opening Net Debt (459.5) (495.7)
£435 million (2003: £419 million), whilst liabilities have also Free Cash Flow 60.0 87.2
risen to £505 million (2003: £474 million) before a deferred Ordinary Dividends (49.4) (32.5)
tax asset of £14 million. This has resulted in a net deficit of Acquisitions and Disposals (100.3) (43.1)
£56 million at the end of the year compared to £36 million at Issue of Ordinary Shares 1.2 0.2
the end of 2003. The increase in the deficit mostly reflected Own Shares Purchased – (44.6)
increasing liabilities due to a reduction in the discount rate New Finance Leases – (1.6)
applied to future liabilities which is derived from bond yields Exchange Rate Movements 36.4 70.6
as well as the reduction in the associated deferred tax asset Closing Net Debt (511.6) (459.5)
due to the Group’s tax position in the UK. The deficit can be