Annual Report 2018 - Signature Aviation/media/Files/S/... · sectors of the global aviation market. Ontic is a leading provider of high-quality, OEM-licensed aviation parts and maintenance,

Annual Report 2018

BBA Aviation Annual Report 2018

Our Vision, Mission and Values

Enabling flight; expanding horizonsBBA Aviation plc is a market-leading, global aviation support and aftermarket services provider. We have more than 6,000 employees worldwide and have operations serving customers and partners on five continents, with a focus on North America.

$2,347.3 mRevenue up 26.4% 2017: $1,857.3m

$340.2 mUnderlying operating profit2 up 1.1% 2017: $336.5m

$147.2 mProfit before tax down 6.6% 2017: $157.6m

11.4 %Total Group ROIC2 up 40bps 2017: 11.0%

BBA Aviation is a values-focused organisation, dedicated to being the world’s leading provider of aviation support and aftermarket services with the overarching objective to deliver exceptional, long-term, sustainable value for all our stakeholders.Our businesses are individually and collectively focused on:• Consistently exceeding customer expectations;• Valuing and empowering our people in a zero incident,

safe environment;• Encouraging innovation;• Working together for greater gain;• Always behaving with integrity and respect.

2018 continuing Group1 revenue splits 2018 continuing Group

1 Group continuing data includes the ERO Middle East business which ceased operations in 2018 and is not part of the Group’s discontinued operations. The revenue of this business is captured within Ontic in the chart above. The geographical split represents revenue by destination.

2 Defined and reconciled to reported financials under Alternative Performance Measures (APMs). See pages 190 to 194.

Strategic Report

Signature 90.6% Ontic 9.4%

Business & General Aviation (B&GA) 80.6% Commercial 12.0% Military 7.4%

North America 89.7% Rest of World 10.3%

BBA Aviation Annual Report 2018 Strategic Report 1

2018 Strategic HighlightsExecution of strategyWe have invested in our Signature and Ontic core businesses, and further improved the performance of the ERO business, the disposal process of which is ongoing. Further, this has all progressed within the parameters of our re-defined capital allocation policy.Fortifying and strengthening the networkDuring the year we acquired EPIC, a leading fuel and fuel-related services supplier to an extensive FBO network of privately owned independent FBOs. EPIC fortifies and strengthens the Signature network, adding fuel volumes to our buying capability and reducing our credit card transaction fees by bringing in house our jointly branded fuel card and extending its penetration across the Signature customer base. We also added St Thomas Jet Center in the US Virgin Islands to the Signature network and Gary International Airport, Chicago as a Select® location. The acquisition of Firstmark Corp, a US aftermarket services business with a portfolio of complementary licences, enhances and grows Ontic, adding 70 skilled people at two US East Coast locations. We completed five further Ontic licence acquisitions in the year.Investing in SignatureWe have continued to enhance our existing FBO network including adding a sports charter terminal at Miami, opening our new FBO facility and hangars at Nashville (in return for a lease extension) and securing a lease extension at Atlanta with the development of a new terminal. Over time we will roll out to major US airports our ELITE ClassTM offer for efficient transfers through our FBO to and from commercial flights. We launched our new customer service-led, fully integrated, FBO management system which seeks to enhance the customer experience and increase returns on our real estate. This, and other investment in technology and processes, will reduce complexity and increase our operational flexibility. A renewed focus on customer segmentation and revenue optimisation will also deliver over the medium term. Cash generationThe core Signature and Ontic businesses have continued to demonstrate their strong cash generative characteristics. We refinanced our Revolving Credit Facility and executed a successful inaugural bond offering.

Strategic ReportBBA Aviation at a glance 01Our businesses 02Q&A with Mark Johnstone 04Business model 08Strategy & KPIs 10Signature 12Ontic 18Group Finance Director’s Review 22Signature 2018 performance 25Ontic 2018 performance 28Resources and Relationships 30Financial matters 38Risk management 42Non-financial Information Statement 47Going Concern 48Viability Statement 49

Directors’ ReportCorporate Governance Report 50Board of Directors 52Executive Management 54Directors’ Remuneration Report 66Additional Disclosures 93Directors’ Responsibilities Statement 95

Consolidated Financial StatementsIndependent Auditor’s Report 96Consolidated Income Statement 103Consolidated Statement of Comprehensive Income 104Consolidated Balance Sheet 105Consolidated Cash Flow Statement 106Consolidated Statement of Changes in Equity 107Accounting Policies of the Group 108Notes to the Consolidated Financial Statements 116Company Balance Sheet 171Company Statement of Changes in Equity 172Accounting Policies of the Company 173Notes to the Company Financial Statements 175Subsidiaries and Related Undertakings 182Five Year Summary 189Alternative Performance Measures 190Shareholder Information 195

Contents

Signature Line Service Technicians prepare to attach a customer aircraft to a Lektro electric tug. Each tow team completes a pre-tow inspection checklist before each movement.

2 Strategic Report BBA Aviation Annual Report 2018

Our businessesWe serve our customers and partners through two principal businesses working in different sectors of the global aviation market.

Ontic is a leading provider of high-quality, OEM-licensed aviation parts and maintenance, repair and overhaul (MRO) services for the continuing support of maturing and legacy aerospace platforms flying in the military, commercial and B&GA fleets. Ontic serves a global customer base from its locations in the USA, UK and Singapore, and works with more than 25 OEM partners.

2018 revenue split

B&GA 6.2% Commercial 38.2% Military 55.6%


Ontic

See page 12

See page 18

Signature is the world’s largest fixed base operation (FBO) network for B&GA travellers and provides premium, full service flight support and non-fuel services, including technical support and aircraft management and charter, for passengers, crew and aircraft in the B&GA space. EPIC provides fuel and fuel related services at FBOs across North America including fuel purchasing cards and transaction processing.

2018 revenue split

B&GA 88.3% Commercial 9.3% Military 2.4%


Ontic data does not include the ERO Middle East business which in 2018 contributed revenue of $3.7 million and an underlying operating loss of $0.7 million to continuing Group results (2017: contribution – revenue: $5.5 million; underlying operating loss $2.4 million).

A Signature Line Service Technician completes the fuelling of an Embraer Phenom jet. Combined, Signature and EPIC pump approximately 500 million gallons of fuel every year.

An Ontic engineer completes his investigation of the electronics module on the B777 integrated refuelling panel. Ontic is the sole source supplier of the panel to Boeing and to an active fleet of more than 1,400 aircraft.

Signature


2012

2012

2016

2016

Today

Today

2008

2008

95 FBO locations

115 FBO locations

203 FBO locations• Landmark

acquisition adds 62

• 18 Signature Select®

196 FBO locations

• 18 Signature Select®

202 EPIC branded FBOs and 121 unbranded

EBITDA1 $m

Reve

nue $

m

Reve

nue $

m

13

38

49

68

$2,217.6 m2018 revenue 2017: $1,643.0m

$320.6 m2018 underlying operating profit1 2017: $329.4m

>400Locations worldwide

5,200Employees worldwide

$216.0 m2018 revenue 2017: $208.8m

$59.3 m2018 underlying operating profit1

2017: $55.2m

5Locations worldwide

640Employees worldwide1 Defined and reconciled to reported financials under Alternative Performance Measures (APMs). See pages 190 to 194.

Network transformation 2008–2018

Revenue and EBITDA growth 2008–2018

Number 1 global FBO network operator serving the B&GA industry

Reve

nue $

m47

147

Reve

nue $

m

165216

Trusted, long-term partner with major aviation OEMs


Q&A with Mark JohnstoneWe have a privileged position as market leader at both Signature and Ontic. We have invested to grow and improve our Signature network and customer offer this year and will continue to do so as we move forward. We are also committed to growing Ontic through a programme of licence acquisitions and selective smaller M&A deals.

We will focus on building on our technology leadership in the FBO space, both in our day to day customer interactions, but also focusing on non-fuel growth opportunities with our customers.”

Mark JohnstoneGroup CEO


Q. How would you describe your first months as CEO?

A. It has been an enjoyable but busy period. I have spent time engaging with our employees, customers and other key stakeholders, including a full schedule with our shareholders, potential new investors and debt investors as we successfully completed an oversubscribed inaugural bond offering to refinance part of our acquisition debt, and held two Capital Markets days in November. We have done exactly what we said we would do. In Signature, we were pleased to acquire EPIC, our joint fuel card partner, which brings a franchise network of over 200 branded locations and a further 120 unbranded locations and QTPod self-fuel technology. We were also pleased to welcome the St Thomas Jet Center, one of the busiest airfields in the Eastern Caribbean, to our network and Gary International Airport, Chicago became a Signature Select® location.We have appointed three very experienced leaders in the Signature business. Tony Lefebvre, Chief Operating Officer, has more than 25 years’ experience in the aviation industry, including running our ASIG business (pre-sale). Tony brings a fresh perspective on safety, customer service and the operational efficiency side of Signature. Shawn Hall joined us from McKinsey two years ago after a career as a Navy pilot and has taken the new position of Chief Commercial Officer. He has 20 years’ experience in the aviation and hospitality industries. Shawn Fallon, who has been with BBA Aviation for nearly ten years, has rejoined Signature as Chief Financial Officer, having been with the ERO business for a number of years. These new appointments will support our focus on creating additional value from our already invested real estate.At Ontic we have continued investing to grow our portfolio of licence IP, investing $27.5 million in the year, and also completed the acquisition of Firstmark, a US East Coast based business with its own IP and portfolio of licences. Ontic’s attractive returns are now visible following the reclassification of the ERO business as discontinued.

Q. What are your first impressions?A. I spent the first few months reacquainting myself

with the Signature business, gaining a deeper understanding of the Ontic business, and visiting our Ontic sites in California and the UK. By engaging with our various internal and external stakeholders, I have also gained honest impressions of areas requiring improvement, the things we’re good at and things less so.

I obviously know the Signature business well, having been CFO between 2009 and 2012 and overseeing network growth from 95 to 115 FBOs. Since then, and following the transformative acquisition of Landmark, Signature has strengthened its position as market leader and has continued to transform and professionalise the FBO industry. I am impressed by the quality of our people, whether it be our customer service representatives, our technicians, our general managers or our ramp operators at our FBOs, and the expertise and proprietary knowledge at our Ontic sites. The Signature team has certainly risen to the challenge of a more testing US B&GA market in 2018, and the Ontic team has been busy integrating the GE acquisition into our Cheltenham facility and preparing for the Firstmark integration.We see huge potential to improve customer service and efficiency at Signature through our ongoing investment in Signet 2.0 which provides, for example, upgraded electronic point of sale systems. We are in the process of rolling out/testing the technology at the front end of our service offering with personal digital assistants (PDAs) to assist us. We will focus on building on our technology leadership in the FBO space, both in our day to day customer interactions, but also focusing on non-fuel growth opportunities with our customers.

I am impressed by the quality of our people, whether it be our customer service representatives, our technicians, our general managers or our ramp operators at our FBOs, and the expertise and proprietary knowledge at our Ontic sites.”

Signature’s new Nashville (BNA) FBO facility offers customers a true taste of the Music City. Signature completed and opened the new FBO and hangar this year, securing a lease extension at BNA.


Q. What are your priorities as you look forward?A. We have a privileged position as market leader

at both Signature and Ontic, but we will not allow ourselves to become complacent. We will continue to ensure that BBA Aviation is a safe place to work and that we remain committed to operating responsibly. This is valued by our employees and by potential employees and we want to make sure that we attract and retain the best talent. We completed our first full company engagement survey since 2014 in the last quarter of 2018 and, whilst there are many positives, as with all companies, it has helped us identify areas of opportunity to drive customer service through improved employee engagement. We will continue to invest in our Signature real estate, whether it be through increasing hangar space or through upgrading our FBOs, noting that this year we have opened a new facility at Nashville and invested in a new sports terminal at our Miami FBO; and we have a number of other significant projects in train.We will also be investing further in technology, our people and culture, and in inorganic growth opportunities, whether it be through Ontic licence acquisitions or M&A at Signature and Ontic, as we did in 2018. We laid out some of the opportunities at our recent Capital Markets Days. No single initiative fully moves the dial, but a combination of many smaller, focused investments, combined with pricing optimisation, will return above market performance through our already invested real estate.

We are also committed to growing the Ontic business and have an EBITDA target of $100 million by the end of 2021. This will be achieved through a combination of licence acquisitions, which have averaged c$30 million per annum over the last ten years, and M&A deals, where we will look to acquire businesses with their own IP or portfolio of licensed IP.

Q. How is the integration of EPIC progressing?A. We were delighted to welcome the EPIC team at

the beginning of the second half. There is limited overlap of locations between the FBO portfolios, with Signature and EPIC being co-located on just six fields. The two models – the Signature ‘owned’ model and the EPIC ‘non-owned’ asset-lite franchise model will operate independently. Clearly, the addition of EPIC’s c.250 million gallons of fuel to Signature’s c.275 million gallons will enhance our fuel buying power. And, as we explored at the Capital Markets days, we are looking to increase penetration of the EPIC fuel card into our Signature network and hence reduce the card transaction fees we pay externally. There is an interesting technology angle to the business too, with QTPod self-fuelling technology currently installed at c1,600 locations for those pilots that choose to self-fuel.

Line Service personnel at Signature Scottsdale (SDL) greet an arriving Dassault Falcon business jet. Passengers and crew will be transferred to the Signature terminal while the aircraft is prepared for its next flight.

Attaching the harness to the B777 integrated refuelling panel. Ontic assembles the complex panel using a combination of externally sourced and Ontic manufactured parts.


Q. How would you describe current US B&GA market conditions?

A. After a first half that grew 2.1%, the summer was quiet, and the market didn’t experience the usual up-tick in flying activity at the end of the summer period. We are not expecting any significant change in US B&GA market conditions in the first few months of 2019, however, we still consider the market to be one capable of delivering structural growth. The FAA is currently forecasting an average growth in B&GA jet flying hours of 2.7% per annum to 2038.

Q. You’ve recently increased the level of market outperformance you believe you can deliver at Signature to 250 basis points. How will you achieve this?

A. Historically, Signature has delivered an average of around 200 basis points of revenue growth above the market, as defined by US B&GA FAA movements growth. As clear market leader in the US it becomes increasingly difficult to outperform the market, however, we have some significant new initiatives being rolled out such as fuel pricing optimisation and, perhaps more critically in terms of revenue growth, the introduction of new non-fuel services which will improve our asset yield. A good example of this is Signature ELITE ClassTM which offers commercial aviation travellers an efficient transfer to their flight through our FBO facilities (also involving security and customs clearance).

Q. Why did you buy Firstmark rather than investing in individual licences?

A. We see opportunities to grow both Signature and Ontic through M&A. While Ontic licence acquisitions are, in effect, a trailing annuity by their very nature of being on mature/maturing platforms, by acquiring the Firstmark business we have acquired a business with a management team and a portfolio of licences that we can grow. Not surprisingly, multiples paid for the acquisition of a business are higher than those paid for individual licences.

Q. Why do you believe you are not the right owner for the Engine Repair and Overhaul business?

A. Within the BBA Aviation portfolio we have two strong businesses competing for capital and these are able to produce returns of at least our required ROIC hurdle rate of 12%. While business performance at ERO has turned around and it has a highly attractive asset in its new, cost efficient, multi-engine overhaul and test facility in Dallas, we believe the business would flourish better under new ownership.

Q. What is your strategy for capital allocation and the balance sheet?

A. Our cash generation characteristics are strong, and we have a clear capital allocation policy which will keep us within our stated net debt to underlying EBITDA range of 2.5–3.0x. In 2018 we spent more than the guided $100–150 million on acquisitions, but our M&A pipeline will not always deliver uniformly within a calendar year. If we project that we will fall below the bottom of the range, either through disposal proceeds or a reduction in the pipeline of opportunities to deploy cash at Signature and Ontic, then we will return cash to shareholders to ensure that we remain in range. The range gives flexibility and headroom for the investment requirements of the Group, both organic and inorganic.

Ontic Cheltenham’s computer-controlled parts storage system supports a smooth production process by enabling the fast-kitting of jobs.

We will continue to ensure that BBA Aviation is a safe place to work and that we remain committed to operating responsibly. This is valued by our employees and by potential employees and we want to make sure that we attract and retain the best talent.“

Investment case

1. Clear market leadership positions in end markets with long-term structural growth drivers

2. Significant barriers to entry underpin sustainable competitive advantage

3. Low fixed cost base with flexible cash investment requirements

4. Multiple organic and inorganic growth opportunities across Signature and Ontic

5. Attractive financial model with strong free cash flow generation


Business modelWe are focused on delivering exceptional, long-term, sustainable value for all our stakeholders through allocating capital to sustain and grow our Signature and Ontic market-leading businesses.

Fundamentals Capabilities

Cash

Market-leading assets and

people

TechnologyManagement

experience & expertise

Customer knowledge

Customer & partner

relationships

Barriers to entry

Robust and flexible

operating models

Strong free cash flow

generation

Market intelligence

Vision, Mission and Values

Governance

Risk management


Action Stakeholders

Capital allocation

Signature

Ontic

EmployeesWe are committed to providing a safe, secure and inclusive environment for all our people and to helping them achieve rewarding and fulfilling careersSee page 33

Customers and partnersWe aim to deliver a customer experience and service that goes beyond expectations and develop long-term, mutually beneficial relationships with our airport, OEM and other partners See page 35

CommunitiesWe proactively manage environmental resources and aim to have a positive impact on our local communities by creating employment and demand for local services, and by encouraging and supporting our teams to contribute to causes they care about.See page 36

ShareholdersWe are focused on delivering sustainable returns to our shareholders through the successful allocation of capital to growth and value creation activities.See page 11


Strategy and KPIsWe have five focused strategic goals that will enable us to continue to compete effectively and drive growth and value creation. Our Key Performance Indicators measure the effectiveness of our strategy and business model.

Advance data empowered decision-making capabilities Invest in skills and technology to drive quality of information available to our businesses

Drive operational efficiency and process improvement Optimise performance of existing business through continuous improvement of processes and approach to market

Expand technology solutions for customers Focus on becoming technology leader in the FBO space

Fortify network and expand portfolio Invest in quality of Signature infrastructure; grow FBO network and services; and expand portfolio at Ontic

Improve customer experience Invest in people, infrastructure and technology to support the customer journey


Organic revenue growth1

Organic revenue growth is a measure of the underlying growth of the business. It excludes the impact of foreign currency, fuel price fluctuations and any contribution from acquisitions and disposals.Our Signature FBO business delivered good organic revenue growth of 3% during 2018. This growth was in part offset by a slight organic revenue decline at Ontic due to non-repeat of 2017 military orders.

Adjusted earnings per share1

Adjusted earnings per share measures the profit attributable to shareholders after interest and tax. It excludes the impact of exceptional and other items.2018 adjusted earnings per share was down 2.9% as 4% growth in underlying operating profit was offset by increases in interest payable and the underlying tax rate.

Cash conversion1

Cash conversion measures how effectively we convert operating profit into cash. Focusing on this measure encourages strong discipline in the management of working capital and decisions on capital deployment, enabling us to continue to invest in growth opportunities.Cash conversion of 118% in 2018 was down on the conversion in 2017, which benefited from the sale proceeds of our ERO Forest Park facility in Dallas and lower capital expenditure.

Return on invested capital1

Measuring ROIC ensures we are focused on the efficient use of assets and capital, with the target of operating returns generated across the cycle exceeding the cost of holding the assets. ROIC is calculated by dividing underlying operating profit for ROIC by invested capital for ROIC. ROIC increased 40bps in 2018.

Dividend per shareThe Group remains disciplined in its approach to the allocation of capital, with the overriding objective being to enhance shareholder value. Our dividend payout reflects the results of this effective management of capital. The Board has a progressive dividend policy with the aim of increasing dividends in line with long-term underlying growth in earnings.2018 total dividend per share increased 5%.

1 Defined and reconciled to reported financials under Alternative Performance Measures (APMs). See pages 190 to 194. Refer to Note 6 for adjusted earnings per share calculation.

2 Historic adjusted earnings per share figures restated for the impact of the October 2015 rights issue.3 Historic dividends restated for the impact of the October 2015 rights issue.

Key Performance Indicators – Total Group Our non-financial KPIs are detailed in the Resources and Relationships section of this reportSee page 30

4%

2%

-2%

0%

2014 2015 2016 2017 2018

3%

2%

(2)%

2% 2%

30.0c

10.0c

20.0c

0.0c20142 20152 2016 2017 2018

21.9c20.1c 21.1c

24.0c 23.3c

50%

100%

150%

0%2014 2015 2016 2017 2018

65%

92%

155%134%

118%

200%

15.0%

5.0%

10.0%

0.0%2014 2015 2016 2017 2018

9.4%11.0%

10.1%11.0% 11.4%

20.0c

5.0c

10.0c

15.0c

0.0c20143 20153 2016 2017 2018

11.57c 12.15c 12.75c 13.40c 14.07c


SignatureNumber 1 global FBO operator and service provider to the B&GA industry, serving customers at more than 400 FBO locations covering key markets in North America, Europe, South America, the Caribbean, Africa and Asia.

PassengerFlight

Customer and partner touchpoints

Aircrew Real EstateAircraft on the ramp at Signature Nashville (BNA). Signature handled more than 1.6 million aircraft movements in 2018.


At a glanceKey services• High-quality, full service flight support

for B&GA travel including fuelling, ground handling, passenger and concierge services and amenities

• Technical support, line and heavy maintenance, inspection and Aircraft on Ground (AOG) services through Signature TECHNICAir™ at key locations

• Over 1,600 QTPod self-serve fuel technology installations

• EPIC fuel purchasing card and transaction processing

• Signature ELITE Class™ offering Signature service to commercial travellers

• Aircraft management and charter services through Gama Aviation Signature Aircraft Management

• Hangarage for overnight parking and home-based aircraft

Signature and EPIC operations1

85 %of 2018 continuing Group underlying operating profit

>1.6 mAircraft movements handled by Signature in 2018

72 %Signature and EPIC network covers 72% of the fuel burn in the top 200 US airports

13.7m sq ftHangar, terminal and office space under management in the USA

Signature locations

North America, 129 Central America, the Caribbean

Europe 26

South America* 19

Africa 1

Asia 3

Signature Select® locations

North America, 11 Central America, the Caribbean

Europe 6

Africa 1

EPIC locations

Branded locations 202 (all in North America)

Unbranded locations 121 (all in North America)

Signature’s Service with a Leading Edge cultural orientation workshop is mandatory for all recently hired employees. The workshop engages team members with the Signature Service Promise and gives them the knowledge and the tools to provide consistent, expert service to meet the customer’s needs.

1 Locations at 28 February 2019.* Signature’s South American network operates under a joint venture agreement with Lider Aviãçao.


B&GA travel is driven by corporate confidence and wealth creation, with a long-term, through cycle correlation to GDP and corporate profits.”

Business & General Aviation marketThe B&GA market covers thousands of aircraft, large and small, outside the commercial and military fleets. Private and business travellers use B&GA aircraft as a productivity, efficiency and leisure tool, particularly in North America where there are significant distances between large conurbations and a lack of efficient alternative travel options. B&GA travel is driven by corporate confidence and wealth creation, with a long-term, through cycle correlation to GDP and corporate profits. The global installed fleet of business jets and turboprops is estimated to be more than 32,000

aircraft, with 64% currently based in North America, and a further 12% in Europe, Signature’s second largest market. The global fleet is expected to grow by 14% over the next ten years and the FAA predicts growth in US business jet flight hours of an average 2.7% per annum to 2038.B&GA flight hours, aircraft movements and asset utilisation are key drivers for Signature and EPIC. Increased activity means more arrivals and departures and a higher uptake of fuel and other services across the network.

A Signature TECHNICAirTM technician evaluates an avionics installation on a Cessna Citation series aircraft.

US

GD

P ($

bn)

FAA

�igh

t mov

emen

ts (‘

000s

)

US �ight movements and GDP

20000 3000

16000

2000

2500

8000 1000

120001500

4000 500

0 02000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

20182017

FAA �ight movements (thousands)US GDP (Billions in chained 2012 Dollars)

Sources: U.S. Bureau of Economic Analysis and FAA.

US

busi

ness

jet �

ying

hou

rs

US GDP (Billions in chained 2012 dollars) US corporate pro�ts ($bn)

US �ight hours correlation to GDP US �ight hours correlation to corporate pro�ts

4500

4000

2000

3000

1000

3500

1500

2500

500

4500

4000

2000

3000

1000

3500

1500

2500

500

05000 10000 15000 20000

US

busi

ness

jet �

ying

hou

rs

0500 1000 1500 2000

Sources: U.S. Bureau of Economic Analysis and GAMA 2018 Annual Report. Data from 1980 to 2017.Note:Flight hours data for 2018 was not available at the time of publication of this report.

R2 = the coe�cient of determination. For example, the R2 of 0.86 indicates that 86% of the variance in �ight hours can be explained by GDP.

R2 = 0.8644

R2 = 0.8204

Sources: St Louis Fed Economic Research and GAMA 2018 Annual Report.Data from 1980 to 2017.

South America

North America

Europe

Asia2

Middle East & Africa

15% 1%

64% of global �eet +1.2% CAGR

12% 2.1%

6% 1.8%

4% 1.6%

20,900 +2,500

4,800 +500

3,800 +900

2,000 +400

1,300 +200


Source: Roland Berger

B&GA global installed fleet of business jets and turboprops 2018–20281

1 Excludes migration effects. Fleet with unknown operating region excluded from analysis. Excludes utility turboprops.2 Asia includes Pacific Rim.

2018 market

A Signature supervisor and Line Service Technician perform a scheduled inspection of a fuel truck. Signature has more than 800 pieces of equipment in its North American fuelling fleet.

2018 fleet Fleet growth 2019–2028

B&GA aircraft movement trends USA and Europe

15%

10%

0%

5%

-5%

-10%

Jan 11Jul 11

Jan 12Jul 12

Jan 13Jul 13

Jan 14Jul 14

Jan 15Jul 15

Jan 16Jul 16

Jan 17Jul 17

Jan 17Jan 18

Jul 17Jul 18

Dec 18

Europe �ight activity monthly – year on year % changeUS �ight activity monthly – year on year % change

Sources: FAA (ETMSC) and EUROCONTROL (ESRA 08).

Signature’s key market measure is US B&GA flying activity (FAA aircraft movements). Movements increased by 0.9% in 2018, an outcome that was lower than expected given GDP growth remained positive across the year. In the first quarter, US B&GA movements grew 2.7%. However, as the year progressed, it became clear that the sector had entered a period of disconnect between positive GDP growth and flying activity. Uncertainty around the US trade tariffs and a slowdown in China are believed to have contributed to a decline in business

confidence in the second half of the year, a deferral of decision making, and a reduction in discretionary flying, which has been particularly notable in our charter customer segment. September faced tough prior year comparatives, which had been positively impacted by flying activity around the 2017 hurricanes. This led to a slight dip in movements in the third quarter. However, the market returned to growth in the fourth quarter.


Competitive advantages• Largest international network of locations

including 45 sole source Signature locations in North America

• Industry leading network relevancy – 37 Signature locations at top 50 US airports (including all of top ten) – Of the top 200 US B&GA locations, Signature and EPIC present at locations where 72% of fuel is burned – Signature present at 13 of the top 20 home bases for business aircraft in the USA – Signature present at both ends of 33 of the 50 most trafficked city pairs in the USA

• Long-term, quality real estate assets; average remaining lease life of 17 years across Signature’s FBO portfolio in North America

• Well positioned for new and renewal airport FBO opportunities

• Large scale infrastructure capable of handling high volume operations

• Highly recognised and valued customer brands• Strong relationships with key customers

and high loyalty scores • EPIC and Signature Select® FBO franchise

and licensing models• Fuel buying power• Highly trained teams empowered to deliver

personalised customer experiences• Technology base that supports customer

journey and captures market/customer knowledge

Acquisition of EPIC

202Branded locations

121Unbranded locations

>1,600QTPod self-serve fuel installations

The acquisition of EPIC significantly strengthens our Signature network offer to customers with the addition of 202 privately owned branded FBOs and over 120 unbranded FBOs. Pre-EPIC, Signature was buying c.275 million gallons of fuel per annum. The combined network will buy more than 500 million gallons, allowing us to leverage our fuel buying power and, potentially, move upstream to the refiners, with associated cost benefits. The acquisition allows Signature to take full end-to-end management of the existing Signature EPIC fuel card programme, associated transaction processing and data capture, as a platform for an enhanced service offering across the entire network.

More customers transacting using the card will save costs and increase customer stickiness to the Signature brand. Current penetration of the Signature fuel card in the network is about 5% but, assuming a penetration rate in line with the EPIC card in the EPIC network, we could reach 25% capture. We also acquired EPIC’s proprietary QTPod technology for self-fuelling AvGas services, which is currently installed at more than 1,600 locations. This has the potential to expand our footprint in the aviation industry via a cloud-based, self-serve terminal that provides a fuelling solution for typically low-volume airports. Furthermore, EPIC has a wealth of experience in procuring military contracts and can now offer a greater value proposition by leveraging Signature’s fuel infrastructure.EPIC is a very effective, asset-lite network extension. As we integrate the EPIC locations, our goal is to deliver a common customer experience across all locations and brands through utilising common technology, network pricing and enhanced loyalty programme offerings.


Strategy to capture growth

Technology transforming the Signature customer experience

Organic growth • Investment in people and real estate to drive network quality and customer experience

• Smart technology to deliver efficient and differentiated service

• Relationships with airport partners to deliver lease extensions/new opportunities

• Extension of EPIC fuel card and QTPod technology

Core revenue source optimisation

• Network agreements and contract management• Customer behaviour segmentation to align

marketing and offer• Pricing optimisation

Non-fuel additional services

• Flight related (e.g. line maintenance, catering, credit card)

• Aircrew support (e.g. rental car, hotels)• Real estate (e.g. hangars, advertising)

Real estate asset utilisation

• New passenger services (e.g. ELITE ClassTM, black car, hotels)

• Drive passenger/aircraft operator/pilot loyalty and stickiness

Network growth • M&A• Signature Select® and EPIC franchise extensions• New airport location opportunities Signature’s new sports charter terminal at Signature Miami (MIA)

will support home and visiting professional and collegiate sports teams travelling on chartered flights to and from the city.

Signature’s new global FBO management system will increase consistency of service delivery and customer experience across the Signature network.

A significant IT investment at Signature will transform our current standard ‘point of sale’ system to a fully integrated global FBO management system. The new Signet 2.0 system gives our customer-facing team members the tools to increase consistency of service delivery and customer experience across the Signature network and will be the first time that our US and EMEA teams will utilise the same platform. This significantly simplifies the technology footprint of the business, thus reducing complexity and, at the same time, increasing our operational flexibility and data management and capture. Transitioning to the new technology will require focused change management to support our end users and we will utilise the learnings from the transition of our Landmark FBO sites to Signature systems to smooth this process.Overall, our aim is to make it easier for our customers to do business with Signature and empower our field teams, whether it be our customer service representatives, our line service technicians or our general managers, to make data-based decisions that benefit both us and our customers.


OnticTrusted, long-term partner with major aviation OEMs serving a global customer base including airlines, aircraft operators, military forces, repair and overhaul providers, distributors and airframe manufacturers.

An Ontic engineer assembles a stand-by altimeter and air speed indicator using barometric capsules precision-engineered on site at Ontic Cheltenham. Ontic supplies altimeters for both civil and military platforms.

Product capabilities

Major Systems

Electro Mechanical

Hydraulics Electronics


At a glanceKey services• Provision of highly complex, pedigree parts,

systems and subsystems for maturing and legacy aerospace platforms; ensuring continuous availability of products for the remaining lifetime of a platform

• Transition of non-core products from OEMs via licence arrangement or acquisition

• Maintenance, repair and overhaul

Ontic’s acquisition of Firstmark Corp in November 2018 delivers an exciting opportunity to create further value. Firstmark’s two locations in North Carolina and New York state expand Ontic’s footprint to the East Coast of the USA, closer to key OEM partners and customers, and bring a strong portfolio of IP-protected parts on established platforms familiar to Ontic.Firstmark operates in both the military and commercial aviation markets and we see particular opportunities to grow penetration in the military sector where Ontic has existing relationships, a strong track record of supporting the readiness of key military assets and where platforms have extended in-service lives.

15 %of 2018 continuing Group underlying operating profit

>7,000Over 165 licences for more than ,000 parts

>25More than 25 OEM partners

>1,200More than 1,200 customers worldwide

Ontic operations1

North America

Chatsworth, CACreedmoor, NCPlainview, NY

Europe

Cheltenham, UK

Asia

Singapore

Acquisition of Firstmark Corp

A light comparison test on a B737 Max cabin rate of climb indicator.

Firstmark location1 Locations at 28 February 2019


56 % New spares

25 % New Original Equipment

19 % Repair and Overhaul

Large addressable marketOntic is focused almost exclusively on the legacy and maturing/sunset phases of the aircraft lifecycle, particularly commercial and military platforms which are out of production but that have long lives remaining. Legacy and sunset platforms represent 25% of the global aircraft fleet, or approximately 39,000 active aeroplanes, generating aftermarket revenues of c$10.6 billion per annum.

Ontic provides critical value to OEM partners and their customers by ensuring the continued availability of parts and MRO services that keep their aircraft flying and extend their operational lives. Ontic operates a disciplined approach to investment and maintains a pipeline of opportunities at every stage of the product acquisition process.

Competitive advantages• Trusted partner relationships with key

aviation OEMs• Portfolio across commercial and military

aviation markets• Intellectual property with a high proportion

of sole source revenue• Knowledge and infrastructure to support

multiple aircraft systems and product types• Proven successful product and skills

transition process• Long-term relationships with customers• Flexible manufacturing facilities; excellence

in supply chain management• Highly skilled, cross-trained workforce• Integrated project teams structured

to support availability• Market knowledge/forecasting capability

and disciplined investment approach

In-service aircraft fleet Ontic revenue mix

Environmental Stress Screening equipment enables Ontic to test products in extreme environmental conditions, simulating in-flight temperature and vibration cycles.

156,000Total in-service fleet

39,000Legacy and sunset/maturing fleet (aircraft >25 years old)


Market intelligence, relationships and people

• Maintain and deepen relationships with key OEMs and customers

• Further and greater use of market, partner and customer knowledge

• Continued investment in skills and employee engagement

• Foster entrepreneurial and solution-focused culture

Optimise opportunity of existing portfolio

• Continue to drive availability to meet customer requirements and extend operational lifetime of platforms

• Expand relationships/product opportunities acquired with Firstmark

• Retention/renewal of existing licences• Pricing optimisation

Expand portfolio

• Investment in business development• Data driven, disciplined new licence process• Continued focus on Intellectual Property rights• M&A

Acquisition and transition

Strategy to capture growth

The B777 integrated refuelling panel is tested under pressure in a vacuum test machine.

The ability to successfully deliver complex carve outs is a core competence at Ontic and a key enabler of our growth plans. A comprehensive example of this is the acquisition, in 2016, of a portfolio of legacy avionics parts from GE Aviation, for a cash consideration of $61.5m. The portfolio had a strong fit with Ontic’s existing business, with high sole source intellectual property content, and also introduced new technologies and capabilities. The acquisition followed the successful transition of the GE Fuels business to Ontic in 2011, highlighting our position as a trusted OEM partner and the continuing desire of OEMs to find solutions for products that are no longer core.GE legacy avionics added a portfolio of parts servicing the military and commercial aviation markets, including electro mechanical, barometric, gyroscope and electronics products. The parts serve a large installed base of over 10,000 active aircraft in the middle to later life cycle stages on key platforms such as the Boeing 737, the Sikorsky Sea King and Leonardo AW101 helicopters, the Lockheed C130/J transport aircraft and the BAE Hawk. The GE business employed some 90 people at its principal location adjacent to the Ontic Cheltenham, UK site with two further sites in Florida, USA and Brisbane, Australia where the workloads

were relocated to Ontic’s sites in Chatsworth, US and Singapore respectively.On signing the transaction, Ontic set up a steerco to oversee the integration and provide support, guidance and control to the overall project. Ontic invested in facility enhancements including a new clean room, a temperature and humidity-controlled workshop and further specialist process areas. Ontic also successfully transitioned 83 GE employees under TUPE and recruited and transitioned a further 23. Through careful planning and intelligent solutions, the transition team condensed the portfolio into a 10,000 sq ft work area within the existing Cheltenham building (from a footprint of 17,000 sq ft at GE). This was achieved through the conversion of ancillary and office areas into a large mezzanine structure. Vertical storage kitting machines and single work flow areas were introduced and product families co-located to further drive efficiency. The successful integration of the GE acquisition underlines the proficiency of the Ontic transition process and gives us confidence regarding the execution of future opportunities.


Group Finance Director’s ReviewBBA Aviation performed well, with Signature outperforming the US B&GA market and further licence investments delivering strong growth in our Ontic business

Financial highlights

$m 201822018

continuing 201722017

continuing3 ChangeChange

continuing

Revenue 2,880.9 2,347.3 2,409.0 1,857.3 20% 26%

Organic revenue growth1 2% 2% 2% 4% – –

Underlying EBITDA1 456.4 417.7 447.9 416.2 2% 0.4%

Operating profit 261.5 227.6 237.4 219.1 10% 4%

Underlying operating profit1 375.2 340.2 360.4 336.5 4% 1%

Underlying operating margin1 13.0% 14.5% 15.0% 18.1% (200)bps (360)bps

Underlying profit before tax1 308.0 273.9 298.3 275.0 3% (0.4)%

Profit before tax 174.3 147.2 168.7 157.6 3% (7)%

Profit/(Loss) for the period 137.9 118.7 119.3 118.5 16% 0.2%

Exceptional and other items including tax (102.6) (97.6) (127.0) (105.2) – –

Earnings per ordinary share – basic

Adjusted1 23.3¢ 21.0¢ 24.0¢ 21.8¢ (3)% (4)%

Unadjusted 13.4¢ 11.5¢ 11.6¢ 11.5¢ 16% –

Earnings per ordinary share – diluted

Adjusted1 23.1¢ 20.8¢ 23.7¢ 21.5¢ (3)% (3)%

Unadjusted 13.2¢ 11.4¢ 11.5¢ 11.4¢ 15% –

Dividends per ordinary share 14.07¢ – 13.40¢ – 5% –

Return on invested capital (ROIC)1 11.4% – 11.0% – 40bps –

Operating cash flow1 308.2 – 317.3 – (3)% –

Cash conversion1 118% – 134% – – –

Free cash flow1 224.8 258.6 220.6 221.3 2% 17%

Net debt1 (1,332.2) – (1,167.1) – – –

Net debt to underlying EBITDA4 2.8x – 2.6x – – –1 Defined and reconciled to reported financials under Alternative Performance Measures (APMs). See pages 190 to 194.2 From continuing and discontinued operations.3 Restated following the presentation of ERO (excluding the Middle East) as a discontinued operation.4 Net debt to underlying EBITDA calculated on a covenant basis.


We made good progress with the implementation of our strategy. We continued to invest in our FBO network through the acquisition of EPIC and the St Thomas Jet Center, and through lease extensions, notably at Atlanta and Nashville. In Ontic we added the Firstmark business and six new licences.Continuing Group revenue increased by 26.4% to $2,347.3 million (2017: $1,857.3 million) including a $292.5 million contribution from the acquisition of EPIC and a $12.3 million contribution from Ontic licence acquisitions and Firstmark. • Signature revenue increased 29.5%, reflecting organic growth in the

Signature FBO business of 3.0%, the six-month contribution from EPIC, the positive impact of higher fuel prices ($138.2 million) and foreign exchange movements ($6.0 million).

• Ontic revenue increased by 3.4% with the contribution from the 2018 licence acquisitions and Firstmark more than offsetting a reduction in prior year military orders which were non-recurring, as expected.

Continuing Group underlying operating profit was $340.2 million (2017: $336.5 million). • There was a robust underlying operating performance in Signature

of $320.6 million (2017: $329.4 million) impacted by previously announced IT spend of $14 million.

• Underlying continuing operating profit at Ontic of $59.3 million (2017: $55.2 million) includes a $6.0 million contribution from acquisitions.

• Total central costs of $39.0 million reduced by $6.7 million (2017: $45.7 million).

Continuing statutory operating profit was up 3.9% to $227.6 million (2017: $219.1 million).We completed the strategic review of our Engine Repair and Overhaul (ERO) business in the first half and reclassified the business as held for sale and reported it as a discontinued operation in late May 2018. We anticipate making a further announcement on the ERO disposal process in due course. Net interest for the continuing operations increased by $4.8 million to $66.3 million (2017: $61.5 million) and includes a one-time gain of $4.6 million from hedging contracts closed out as part of the refinancing announced in April 2018. Net debt increased to $1,332.2 million (2017: $1,167.1 million). Net debt to underlying EBITDA increased to 2.8x on a covenant basis (2017: 2.6x) and 2.9x on a reported basis (2017: 2.6x). Interest cover on a covenant basis decreased to 7.9x (2017: 8.4x).Continuing underlying profit before tax was broadly flat at $273.9 million (2017: $275.0 million). Statutory profit before tax for the continuing Group was $147.2 million (2017: $157.6 million). The decrease arose principally from the higher level of exceptional and other items charged.The Group’s underlying tax rate for continuing operations was 21.0% (2017: 18.7%). The increase in rate of 2.3% primarily reflects the non-repeat of prior year adjustments in 2017 and the impact of US tax reform in late 2017. Cash taxes paid reduced significantly to $27.1 million (2017: $41.8 million) largely as a result of non-repeat tax payments made in 2017 relating to taxable gains on the disposal of ASIG. In addition, 2018 cash taxes benefited from the introduction of 100% capital allowances as part of US tax reform and timing of payments for the 2018/19 tax year.

Signature continued to outperform its markets and, along with Ontic, established a platform for further growth.”

David CrookGroup Finance Director


Adjusted earnings per share for continuing operations was down 3.7% to 21.0¢ (2017: 21.8¢). Statutory earnings per share for continuing operations was flat at 11.5¢.Exceptional and other items after tax, for continuing and discontinued operations, totalled $102.6 million (2017: $127.0 million) of which $5.0 million (2017: $21.8 million) related to discontinued operations. Key components of this for continuing operations are the non-cash amortisation of acquired intangibles accounted for under IFRS 3 ($88.8 million), impairment primarily relating to Sloulin Field FBO ($14.1 million), restructuring expenses ($8.9 million), and a one-off past service pension cost in relation to Guaranteed Minimum Pensions (GMP) equalisation within our UK plan ($11.1 million). Exceptional and other items on discontinued operations of $5.0 million, net of tax, relate to the conclusion of the restructuring of our ERO Dallas footprint and costs relating to the strategic review and disposal process of the ERO business. Free cash flow for the continuing Group improved to $258.6 million (2017: $221.3 million), primarily as a result of the working capital inflow. Total Group free cash flow was $224.8 million (2017: $220.6 million). There was a $26.2 million outflow of working capital in 2018 (2017: $46.3 million outflow). The outflow in 2018 was largely due to the decreased availability of parts from OEMs in the discontinued ERO business, which impacted timing of completion on engine overhaul events.

Gross capital expenditure amounted to $93.1 million (2017: $85.3 million). Principal capital expenditure items include investment in Signature’s FBO developments at Nashville, Las Vegas, and the construction of a sports charter terminal at our Miami FBO which will support our Signature ELITE ClassTM growth initiative. Cash flows on exceptional and other items were an outflow of $19.5 million (2017: $12.7 million outflow) and are largely a result of restructuring expenses and costs associated with the disposal process for our ERO discontinued operations.The Group made $5.9 million of pension scheme payments (2017: $5.1 million).Net interest payments were $58.2 million (2017: $57.2 million) and dividend payments amounted to $140.7 million (2017: $130.7 million). Total spend on acquisitions and licences completed during the year was $226.8 million (2017: $81.0 million), which included the acquisition of EPIC and Firstmark, Ontic licence acquisitions from Honeywell and Esterline, along with the acquisition of a minority stake in the St Thomas Jet Center. Total Group Return on Invested Capital (ROIC) increased by 40 bps to 11.4% (2017: 11.0%). The Board is declaring an increased final dividend of 10.07¢ (2017: 9.59¢) up 5% reflecting the Board’s progressive dividend policy and its continued confidence in the Group’s future growth prospects. This gives a total dividend for 2018 of 14.07¢ (2017: 13.40¢).

Capital allocation framework

Advance data empowered decision-making capabilities

Drive operational efficiency and process improvement

Expand technology solutions for customers

Fortify network and expand portfolio

Improve customer experience

Growth and value creation Per annumCapital expenditure c.$100m

Ontic licences $30–35m

M&A opportunities $100–150m

Core dividend – sustainable growth c.$140m

Return to shareholders To maintain 2.5x leverage

Strong free cash flow underpins our growth strategy and supports our capital allocation framework.”


Signature 2018 performanceWe remain confident in Signature’s ability to continue to deliver significant value creation across our enlarged network.

Financial summary$m 2018 2017 Change

Revenue 2,127.6 1,643.0 29.5%

Revenue North America 1,926.5 1,463.0 31.7%

Revenue Rest of World 201.1 180.0 11.7%

Organic revenue growth1 2.7% 3.8% –

Underlying operating profit1 320.6 329.4 (2.7)%

Underlying operating margin (adjusted for fuel)2 15.1% 18.5% (340)bps

Operating profit 244.6 247.1 (0.8)%

Operating cash flow1 350.0 313.4 11.7%

ROIC1 11.8% 12.2% (40)bps1 Calculated in a consistent manner to Alternative Performance Measures (APMs). See pages 190 to 194.2 Underlying operating profit at constant fuel prices as a percentage of revenue.

Uncertainty around the US trade tariffs and a slowdown in China are believed to have contributed to a decline in business confidence in the second half, and a reduction in discretionary flying, which has been particularly notable in our charter customer segment. European B&GA movements were up 0.5% in 2018.Signature FBO underlying operating profit was down 1.9% to $315.7 million (2017: $321.9 million) which was impacted by previously announced investments in commercial technology to enhance customer service and support revenue optimisation initiatives. We remain confident in Signature’s ability to continue to deliver significant value creation across our enlarged network, supported by the commercial growth investments made during 2018 and the initial implementation of the strategic growth initiatives presented at the recent capital markets day. The underlying operating margin in Signature FBO was 17.9% (2017 on a constant fuel price basis: 18.9%) and reflects the impact of commercial technology investment noted above.

Signature’s overall revenue, which includes our Signature FBO business, our line maintenance business TECHNICAir and EPIC, increased by 29.5% to $2,127.6 million (2017: $1,643.0 million). The EPIC acquisition contribution was $292.5 million for the six months of ownership and the positive impact of higher fuel prices and foreign exchange movements, together increased revenue by $144.2 million. Signature’s organic revenue, which excludes the impact of higher fuel prices, foreign exchange and acquisitions, increased by 2.7%. Signature FBO revenue increased 12.4% to $1,761.0 million (2017: $1,566.6 million). This was an increase of 3.0% on an organic basis, after adjusting for higher fuel prices of $138.2 million and foreign exchange movements of $5.7 million, which was delivered against a backdrop of US B&GA movements (source: FAA) which were up 0.9% for the year to December 2018, representing outperformance of 210 basis points. We continue to believe the US B&GA market is a long-term structural growth market, correlated with GDP growth but that we are currently in a period of short-term disconnect.

$2,127.6 mRevenue up 29.5% on 2017

$320.6 mUnderlying operating profit down 2.7% on 2017

11.8 %ROIC down 40bps on 2017

Key figures


Revenue bridge ($m)

Underlying operating profit bridge ($m)

TECHNICAirTM experienced a challenging year in 2018 with organic revenue decline of 3.4% to $74.1 million (2017: $76.4 million). Underlying operating profit reduced by some 50.7% to $3.7 million (2017: $7.5 million) due to the availability of skilled technicians and lower repair activity on key contracted maintenance accounts.EPIC joined the Group on 1 July 2018 and contributed revenues of $292.5 million and underlying operating profit of $2.9 million for the six months of ownership. The underlying operating profit was offset by $1.7 million of EPIC-related transaction and integration costs. The integration of EPIC is progressing in line with expectations.Statutory operating profit of $244.6 million decreased by 1.0% (2017: $247.1 million). Operating cash flow for Signature improved to $350.0 million (2017: $313.4 million), principally due to improved working capital performance. Return on invested capital decreased marginally to 11.8% (2017: 12.2%). Signature strategic growth initiativesWe continue to invest in our Signature FBO network, including investments in new technology to enhance our fuel and non-fuel revenue management capabilities. As previously announced, we have been investing in enhanced EPoS and revenue optimisation tools. The Group is confident that the outperformance of the Signature FBO network against the US B&GA market demonstrates the ability of our unrivalled network to deliver value. In the first half of 2018, Signature secured a significant lease term extension with a new 20-year lease (with a possible further five-year extension) at its sole source FBO at Hartsfield Jackson Atlanta International Airport. Here, at what is the world’s busiest hub airport, we are investing in a new FBO facility and will launch our Signature ELITE Class™ service which provides private transfers to/from commercial flights via Signature’s FBO facilities. In the first half of 2018 we also opened a 3,500 square foot Sports Charter terminal at our FBO at Miami International Airport. The new facility will support a higher volume of home and visiting professional and collegiate sports teams travelling to and from the Miami area.

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1,643.0 6.0138.2 1,787.2

292.5 47.9

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EPIC acquisitionEPIC was acquired on 1 July 2018 and provides fuel and fuel related services at 202 EPIC branded, privately owned independent FBO locations, and 121 unbranded locations. EPIC’s FBO locations complement our existing Signature Select® branded locations, establishing a non-owned, franchise network to operate alongside our market-leading owned FBO network. EPIC is our existing Signature fuel card partner and the acquisition allows Signature to have full end-to-end management of the Signature EPIC fuel card programme, associated transaction processing and data capture, as a platform for an enhanced service offering across our entire network. We also acquired EPIC’s proprietary QTPod technology for self-fuelling AvGas services. QTPod is expanding its footprint in the aviation industry with a new proprietary and cloud based self-serve fuelling terminal.We acquired EPIC for a purchase price of $88.1 million, which represents an expected year one EBITDA multiple of 11.7x, and the business is expected to achieve our ROIC target threshold of 12% by year three. St Thomas Jet CenterIn October we reached an agreement to acquire St Thomas Jet Center located at Cyril E. King – Charlotte Amalie Airport in St Thomas, United States Virgin Islands. This acquisition further expands our presence in the Caribbean and will occur in two phases: 49% was acquired on signing and we expect to acquire the remaining 51% of the business within 14 months of that date. The St Thomas Jet Center comprises an executive terminal, an aircraft maintenance and storage hangar and a newly constructed fuel farm. Our FBO networkThere are 196 locations in Signature’s global network, including 18 Signature Select® franchise locations, including Gary International Airport in Chicago which we added during the year. Following the acquisition of EPIC we added 202 privately owned, EPIC branded independent FBOs and a further 121 unbranded locations. This creates a total network of over 400 FBO locations, significantly extending Signature’s network relevance and the range of services it can offer.During the year we have also invested in a new Executive and Sports Charter terminal and hangar space at Nashville Airport. The $15 million investment commitment in a new 8,000 square foot terminal and 25,000 square foot hangar secured a new 30-year lease with the Metropolitan Nashville Airport Authority. We have also completed the renovation of our Las Vegas FBO at McCarren International Airport. The complete interior renovation of the 8,000 square foot facility includes modern pod-configuration customer service counters, customer lounge area and bar, crew lounge, quiet rooms, conference rooms and a business centre and management offices.As we look forward, we will focus on delivering more value through leveraging Signature’s unique network of FBOs through a combination of organic growth, core revenue source optimisation, non-fuel revenue growth and new services and improved asset utilisation. We will continue to focus on delivering improved yield management of both fuel and non-fuel revenues from our real estate footprint through first-class customer experience, customer segmentation and technology.

We will also further develop our existing non-fuel services, through the increased penetration of our Signature/EPIC card services programme, as presented at our recent Capital Markets Day. Over time, we will also leverage the increased opportunity in advertising throughout our real estate, which builds on our unique customer group that controls significant wealth. With regard to new services being introduced over the next few years, we will be focusing on ELITE ClassTM (our commercial passenger interconnect service) as further evidence of Signature redefining the market reach for B&GA infrastructure. Through this range of growth opportunities, we are now targeting market outperformance of some 250 basis points above US B&GA movement growth over the medium term. We continue to evaluate a number of investment opportunities that we believe will further enhance and fortify Signature’s unique real estate network as we continue to lead the development of the B&GA market.


Ontic 2018 performanceOntic continues to assess a strong pipeline of opportunities in relation to new products and licence adoptions.

Financial summary$m 2018 20172 Change

Revenue 216.0 208.8 3.4%

Revenue North America 134.1 122.8 9.2%

Revenue Rest of World 81.9 86.0 (4.8)%

Organic revenue growth1 (3.7)% 4.5% –

Underlying operating profit1 59.3 55.2 7.4%

Underlying operating margin1 27.5% 26.4% 110bps

Operating profit 43.5 43.7 (0.5)%

Operating cash flow1 51.4 54.0 (4.8)%

ROIC1 15.6% 16.8% (120)bps1 Calculated in a consistent manner to Alternative Performance Measures (APMs). See pages 190 to 194.

Ontic data in the table above, key figures to the right and the charts opposite does not include the ERO Middle East business which in 2018 contributed revenue of $3.7 million and an underlying operating loss of $0.7 million to continuing Group results (2017: contribution – revenue: $5.5 million; underlying operating loss $2.4 million).

There was an operating cash inflow for the division of $51.4 million (2017: $54.0 million inflow) driven by working capital performance. Return on invested capital was 15.6 % (2017: 16.8%). Ontic strategic growth initiativesNew licence acquisitionsEarly in 2018 Ontic signed a first product licence with Racal Acoustics, part of Esterline Corporation, for various military and civil avionics products including cockpit communication control systems. We also signed a new licensing agreement with Honeywell for cockpit LCD displays on multiple commercial, military fixed-wing and rotorcraft platforms. We were pleased to sign a first product licence with Engine Control Services (part of United Technologies Aerospace Systems) for the manufacturing and aftermarket support of military fuel control products. Our fourth licence acquired in 2018 was with Ultra Electronics.

Ontic revenue increased by 3.4% to $216.0 million (2017: $208.8 million). On an organic basis, which adjusts for FX of $2.7 million and the contribution from Ontic licence acquisitions and Firstmark of $12.3 million, revenue declined by 3.7% given the previously highlighted strong prior year comparative due to non-recurring cyclical military orders.Underlying operating profit of $59.3 million increased by 7.4% (2017: $55.2 million) driven by the contribution from Ontic licence acquisitions and an initial one-month contribution from Firstmark, which together added $6.0 million. On an organic basis, excluding FX of $0.9 million and acquisitions of $6.0 million, Ontic’s underlying operating profit decreased 5.0%. Underlying operating margins improved to 27.5% (2017: 26.4%). Statutory operating profit of $43.5 million decreased by $0.2 million (2017: $43.7 million).

$216.0 mRevenue up 3.4% on 2017

$59.3 mUnderlying operating profit up 7.4% on 2017

15.6 %ROIC down 120bps on 2017

Key figures


In December 2018 Ontic signed a new licence agreement with a major OEM for legacy support on engine pressure transmitters, fuel flow transmitters and fluid monitoring chip detectors fitted to a range of commercial/military rotorcraft and fixed wing platforms. Under the terms of the agreement Ontic, out of its Chatsworth facility in California, will be responsible for all ongoing new build production and repairs and spares support for the global customers of this large installed base. This further enhances our relationship with this OEM and highlights our capability to strategically assist OEM partners with on-going support of their non-core products. Our total cash spend on licence acquisitions was $27.5 million (2017: $79.9 million) and, in addition, deferred consideration of $10 million was paid in January 2019 for the December licence acquisition from the major OEM.Firstmark Corp acquisitionIn September 2018, we announced the acquisition of Firstmark Corp, an aerospace focused aftermarket service provider, for a consideration of $97.4 million. Firstmark is a leading provider of highly engineered, proprietary components and subsystems for the aerospace and defence industries. The company employs over 70 people and has locations at Creedmoor, North Carolina and Plainview, New York and expands Ontic’s US footprint to the East Coast. It is highly complementary to Ontic’s existing sites in Chatsworth (California), Cheltenham (UK), and Singapore.Firstmark enhances Ontic’s exposure to the commercial and military aerospace markets, providing access to a range of growth opportunities across various established strategic platforms, with a significant installed base, high utilisation rates and extended in-service lives. The $97.4 million consideration represents an expected year one EBITDA multiple of 11.1x before acquisition related expenses. Firstmark is expected to contribute revenue of around $27.0 million in 2019, its first full year of ownership. The acquisition completed at the end of November 2018, resulting in a one-month contribution.Ontic continues to assess a strong pipeline of opportunities in relation to new products and licence adoptions and possible M&A. As highlighted at our recent Capital Markets Day, through effective execution of the licence and M&A opportunities available we expect Ontic EBITDA to reach $100 million by the end of 2021. We continue to screen these investment opportunities at our 12% pre-tax ROIC threshold.

Revenue bridge ($m)

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Resources and RelationshipsBBA Aviation is a values-led organisation. Our Vision, Mission and Values are deeply embedded within our businesses and culture and support our goal of being a responsible company. Our Values guide each of us every day and describe the approach we take to managing our key resources and our relationships with stakeholders.

Good business behaviour drives our reputation with employees and external stakeholders and underpins the sustainability of our business and our financial performance. This means taking a responsible approach to the operation of our companies and the conduct of our personnel; supporting our people; and building strong relationships with our customers, partners, suppliers, and the communities in which we operate. The Board takes overall responsibility for our company culture, setting direction and determining key policies. Day-to-day management is then delegated, via the Executive Management Committee, to our businesses and to the functions that support them.

External benchmarksSince 2006, as BBA Aviation plc, we have been a member of the FTSE4Good index and we participate in the carbon disclosure project. It is BBA Aviation’s objective, over time, to maintain and improve its ranking within the FTSE4Good index and to seek further corporate responsibility benchmarking to guide our efforts and drive continuous improvement in performance.

PerformanceWe focus on delivery of long-term and sustainable value, continuous improvement and reliability.

SafetyWe are dedicated to safety and security, the elimination of hazards and protecting people, property and our environment.

PeopleWe are committed to investing in and empowering our people through training and education and to providing them with opportunities for rewarding careers.

IntegrityWe earn the trust and respect of our stakeholders with honesty, fairness, openness and by honouring our commitments.

ResponsibilityWe are committed to managing our impact on, and contributing positively to society and the environment.

ServiceWe strive continually to anticipate customer needs, exceeding their expectations.

A responsible business

Our Values


Safety and securityThe safety and security of our teams, our sites, our customers, and all those that come into contact with us, is our number one concern. Safety underpins our licence to operate and it is our view that our employees should expect to leave their place of work safe and unharmed at the end of every day.Our goal is zero preventable incidents (ZIPP) and our Health and Safety strategy seeks to promote and instil a proactive safety culture at all sites to make ZIPP achievable. We are three years into the implementation of a formal Safety Management System (SMS) and are currently operating at Level 3 Proactive Processes (which is the fourth of five levels). Each of our businesses formulates an annual Safety Business Plan which is available electronically so that sites can monitor progress against targets. Performance is monitored at site level through our SHEBBA reporting and management tool. The SHEBBA tool provides critical information on a range of metrics including near misses, hazards and security incidents.Our operational management teams are primarily responsible for health and safety and are supported by a dedicated team of health and safety professionals which reports through a formal health and safety organisation to a senior HSSE (Health, Safety, Security, Environment) lead at each of our businesses. Our critical HSSE training programmes are developed and implemented by this group.

Safety performanceRecordable Incident Rate (RIR)RIR is our primary health and safety performance metric. RIR is measured as the total number of injuries and illnesses multiplied by 200,000, divided by the number of actual hours worked by all employees.

2018 2.192017 2.362016 1.812015 2.162014 2.41

Data includes Engine Repair and Overhaul and EPIC. Data excludes Firstmark which will be included from 2019.

Number of locations achieving zero RIR132 of 208 or 63% of BBA Aviation reporting locations achieved zero RIR during 2018.

2018 1322017 1312016 1382015 932014 86

Data includes Engine Repair and Overhaul and EPIC. Data excludes Firstmark which will be included from 2019.

The Signature Safety Observation programme uses direct observation of service functions to identify non-compliant behaviour and address safety risk. The checklist programme went digital in 2018.


During 2018 we introduced a number of significant new initiatives to support continuous improvement in our safety culture and performance. These include going mobile with the SHEBBA tool at Signature, enabling our teams to have access to data and record safety-related events in real-time, as well as launching a new Signature safety communications site to connect to key safety related resources, including videos, alerts and Signature’s weekly HSE newsletter. We also put greater focus on safety training compliance through the HSE audit process and increased communication with our FBO General Managers. A number of safety training modules were rolled out to our recently acquired EPIC business during the year.Our third annual ZIPP Global Safety Day was held in March with the theme ‘back to basics’, encouraging our teams to take a fresh look at safety and individually commit to making every day a Safety Day. Our Health and Safety Approach is available to download from the Corporate Responsibility section of the BBA Aviation website.

Key HSE performance data is displayed and updated in real time on an interactive screen in a busy communal area at Ontic Cheltenham.

IS-BAH accreditationIS-BAH (International Standard for Business Aircraft Handling) is the only recognised global safety standard for business aviation. Accreditation demonstrates a location’s compliance with a wide range of safety protocols and is a positive tool for strengthening relationships with our customers and airport partners. Over the last two years, Signature has been pursuing a programme of accreditation and, to date, is accredited at 11 locations (9 EMEA, 1 North America and Panama). We are closely monitoring the benefits of accreditation and expect to continue to grow the number of accredited sites over the next few years.

Safety Observation ProgrammeSignature’s Safety Observation Programme was launched in 2015 and is designed to identify at risk activity and behaviour through direct observation of our employees, with the goal of addressing safety risk before it materialises as a near miss or incident. The programme uses checklists that are activity oriented and organised by service function (e.g. fuelling, towing, de-icing), with outcomes used to inform our training, mentoring and coaching activities. In 2018, the programme went digital, with sophisticated dashboards and reports that enable our teams to work quickly and actively monitor trends in real time.

Everbridge emergency communicationOur new Everbridge emergency communication tool enables us to quickly connect with, and account for, employees in emergency situations such as hurricanes, tornadoes, wildfires and security incidents. The cloud-based resource is tied to our HR system and contacts our people automatically via various means (email, phone, app), enabling our field teams to focus on dealing with the situation at hand.

Security incident exercisesIn August and September, our Business Continuity Management team and PwC directed two table top security incident exercises to test and refine the actions and processes outlined in Signature’s Emergency Preparedness and Response Plan. At Signature Teterboro (TEB), working with the local police, we considered an incident in which a suspicious package was found in the FBO lounge, a jet was boarded illicitly, and the pilot taken hostage, and the airport shut down and evacuated. In the second scenario, working with the airport team at Luton (LTN), two suspicious packages were found and identified as explosive material, and an individual with no credentials was arrested having been seen tampering with an aircraft – also leading to evacuation. Both exercises provided key learnings that have now been incorporated into the relevant plans.


Our peopleWe are committed to providing a safe, secure and inclusive environment for all our people and to helping them achieve rewarding and fulfilling careers.Our people are the foundation of our success. Their service skills and their functional, operational and engineering expertise are the core of our business. Ensuring that we attract, develop and retain the best people is vital to our future success.Our Human Resources strategy aims to create a workplace that supports our employees to reach their own goals, offering a competitive salary in a meritocratic environment, recognition for achievement and contribution, appropriate training and development, and a culture that is inclusive and embraces diversity. We aim to engage all of our employees in these efforts, and in the strategic goals of the Group and our businesses, by empowering individuals and pushing accountability and ownership to the most local level so that everyone benefits.Leadership and learningWe provide every member of our team with specific and relevant job-related training and with opportunities to expand their knowledge and capabilities and give them the tools to reach their potential. Our recent focus has been on developing the skills of our leaders, so that they may better support the needs of the business and of their teams.Recognition and communicationRecognition is an important part of our culture. Exceptional performance is highly valued and is recognised and rewarded through programmes such as Tow It Like You Own It at Signature, our Group-wide Above and Beyond cards, and our Vision, Mission and Values Awards. With locations all over the world, we have developed a range of methods to formally communicate with employees – these include a regular newsletter, digital updates, shift-briefs at Signature, All Hands meetings at Ontic, and multi-media programmes to support specific initiatives such as our recent Employee Engagement Survey and the launch of our Cyber-Security Toolkit.Inclusion and diversityWe recognise that inclusion and diversity are an important factor underpinning our future success. Building on work we have done in the past, in 2018 we partnered with an external specialist to agree our definition of inclusion and diversity and set out a vision and a strategy to achieve tangible and measurable results over the next three years. This work was informed by findings from our 2018 Employee Engagement Survey, which contained specific questions on this area and will be supplemented by data from focus groups undertaken in February 2019.Our BBA Celebrates! initiative continued in 2018. This aims to involve our employees in a variety of local and global cultural events and holidays, thus seeking to celebrate the diversity of our team at a grass roots level.Our Equal Opportunities and Anti-Harassment Guidelines set out our expectations of employees in this area and our approach to dealing with issues should they arise.

Recognising that gender is only one form of diversity to which we are committed, we are pleased that women make up 25.5% of our employee population. At the date of this report we have four female non-executive directors on our Board and one female member on our Executive Management Committee.In 2018 we published our first Gender Pay Gap report for H+S Aviation in the UK and, in 2019, will publish reports for both H+S Aviation and Ontic UK. The table below shows the percentage of women employed in various roles at 31 December 2018:

Population1 Total population No. of women % of women

Board 9 3 33.3%Executive Management Committee 9 1 11.1%Senior management 86 16 18.6%Directors of subsidiaries included in consolidation2 31 4 12.9%All employees of the Group 7,181 1,833 25.5%

1 Data includes Engine Repair and Overhaul.2 This disclosure includes dormant companies and multiple directorships, and we do not believe it is an

accurate indicator of diversity.

Ontic has a range of development programmes to support the ongoing needs of its team and the continuing growth of the business.


Listening to employeesIn October/November 2018, working with Gallup, we undertook a formal Employee Engagement Survey, our first since 2014, to gather quantitative feedback from our team on a range of issues from safety and customer service to leadership and recognition. This work followed a separate, more informal process to gather qualitative feedback from the Signature and BBA Aviation Group teams. 71% of our employees participated in the Gallup survey, and the results from both surveys are being used to develop action plans for improvement at a local level during the first quarter of 2019. Local managers are being given access to anonymised data from their areas so that they are empowered to drive this process and so that our employees see the results of their feedback.

During the year we made significant progress with the roll out of our new global HR information system, which will streamline our performance management process, deliver better reporting and analytics, and give employees better access to key personal data. We have developed the next stage of our Signature Manager in Training programme which is designed to build a ‘ready now’ pipeline of talent for the critical FBO General Manager role.Our leaders are being supported by our new LEADS (Leadership, Education, Action, Development, Success) initiative, which offers monthly leadership resources, online access to hundreds of courses, and quarterly virtual roundtable discussions that all of our leaders can join. Ontic is also pioneering new bitesize peer training events where leaders come together to work through a specific management theme, e.g. performance review, and then share their individual experiences.For the second year in succession, we sent a delegation of young leaders to the One Young World global summit. The group will make regular presentations to the Executive Management Committee on ideas arising from their experience.Human rightsWe respect the principles of the Universal Declaration of Human Rights and the International Labour Organization’s core conventions. We are committed to treating people according to merit and contribution, refraining from coercion and never deliberately causing harm to anyone. BBA Aviation has not adopted a formal human rights policy as we believe that our existing adopted policies and our Vision, Mission and Values recognise the importance of how we conduct our business and its impact on a wide range of stakeholders, and therefore our responsibilities in relation to human rights. The requirement for a specific human rights policy will continue to be monitored.

We are committed to listening to our employees. Data from our 2018 Employee Engagement Survey has been provided to managers to empower them to work with their teams to create and deliver local action plans so that they can see the results of their feedback.

Signature Managers in TrainingSignature’s North America Manager in Training programme takes participants through a rigorous 18-month curriculum in which they are trained in all aspects of operating an FBO. Upon successful completion, trainees are assigned a General Manager position within the North American network. Applications to the programme are encouraged from FBO employees working in a range of service activities.

Ontic Growth NetworkThe Ontic Growth Network is a development forum for employees to learn from the experience of others and debate issues online and through special events such as senior leadership team Q&As. The forum is currently operational at Ontic Cheltenham and will be rolled out to the wider BBA Aviation group as the BBA Aviation Growth Network during 2019.

Integration of Firstmark The acquisition of Firstmark brought more than 70 new employees into the Ontic team. Prior to the completion of the acquisition, a detailed plan was put together to welcome the new team and integrate them into the Ontic and BBA Aviation family. An All Hands meeting with the Ontic Senior Leadership Team was held at each site in the two days following the acquisition and a dedicated website portal and email address provided for information and questions. Reciprocal manager visits have taken place between the Ontic Chatsworth and Firstmark sites and Firstmark employees took part in the Employee Engagement Survey at the beginning of 2019. During the first half of 2019, Ontic expects to roll out to Firstmark its safety and training programmes and other BBA Aviation resources.


Customers, partners and suppliersWe aim to deliver a customer experience and service that goes beyond expectations and develop long-term, mutually beneficial relationships with our airport and OEM partners and our suppliers.Our customers and partners expect high quality, reliability and excellent service from our businesses and from our people. Service and relationships are at the heart of what we do, whether we are dealing with an arriving VIP and his or her aircraft, negotiating with an airport authority, or planning a product transition with an OEM and its customers. We are focused on driving incremental improvements every day through the quality of our people, through investment in our sites and our infrastructure, through new and efficient ways of working, and by leveraging technology and data to anticipate customer needs and support the customer journey.Ethical conductBBA Aviation’s suite of ethical conduct policies embodies our commitment to ensuring that our business relationships and our supply chains are managed in line with our Values and the national and international legal frameworks in which we operate.Our Code of Business Ethics is the cornerstone of our compliance mindset and corporate programmes. Flowing from the code, our other policies, procedures and internal controls are designed to address specific issues, conduct or risks in a more comprehensive manner, including bribery and corruption, for which we have a standalone policy. The code requires all BBA Aviation employees to conduct themselves according to the language and spirit of the code and to avoid even the appearance of improper behaviour.Our Third Party Vetting Policy sets out guidelines and procedures for assessing BBA Aviation’s business partners through due diligence processes. Depending on the relative risk associated with a third party (determined using criteria such as country, proposed relationship, etc.), we undertake standard or enhanced due diligence on third parties with whom we do business, including suppliers, contractors and service providers. In addition, our Code of Ethics for Suppliers, Contractors and Consultants clearly sets out our expectations for our business partners concerning compliance with all applicable laws; conduct of business in a fair and ethical manner; respect for human rights;

conservation of the environment; and provision of high-quality, safe products and services. Our compliance programmes are subject to continuous improvement, including evaluation against best practices and external benchmarking, and we periodically undertake audits and/or request confirmation of compliance from suppliers and other parties deemed to be high risk. Internal compliance with our policies is monitored and reported through our Internal Audit process.Disclosure of unethical conductWe are committed to fostering a transparent, open working environment where concerns can be readily raised and grievances can be properly addressed in a timely and confidential manner. Our Disclosure of Unethical Conduct Policy describes our open reporting culture and processes. Our employees are required to report any actual or suspected unlawful or unethical business practices. The policy enables anyone working in or for a BBA Aviation company who suspects that any unlawful or unethical business practice is being carried out (or is likely to be carried out), by any BBA Aviation employee or by any supplier, or other person providing services to or acting on behalf of BBA Aviation, to raise the matter immediately. Retaliation for reporting concerns is strictly prohibited as a matter of company policy. A bi-annual summary of any reports is prepared for the Audit and Risk Committee.Our Ethics policies are available to download from the Corporate Responsibility section of the BBA Aviation website. Our policies are reviewed on a regular basis and our legal team provides mandatory training on an annual basis to all managers and to employees working in roles that require it.Modern Slavery StatementBBA Aviation’s Modern Slavery Statement is available to download from the Corporate Responsibility section of the BBA Aviation website. It details the work done by the BBA Aviation Procurement Council in 2017 and 2018 to analyse the entirety of our supply chain spend and identify any areas that might be at risk of modern slavery practices. We experienced full co-operation from our business partners in this process and believe that the systems of control and compliance we have in place enable us to effectively safeguard against these practices.

Service with a Leading EdgeSignature’s Service with a Leading Edge cultural orientation workshop is mandatory for all new Signature employees within 90 days of joining. It aims to engage every team member with the Signature Service Promise and give them the knowledge and the tools to delight the customer, whatever their area of work or level of seniority. The four-hour programme uses a mix of presentation and discussion to guide participants to understand the value of great service and being a positive brand ambassador and drive individual accountability for delivering it. The workshop is facilitated by Signature employees who are able to draw on their own experience to enhance the session.

Ontic value streamsAt Ontic, it is recognised that different market segments and different customer groups expect different service standards and have different requirements for specialist skill sets. Ontic therefore organises its business by discrete value streams, with each identified value stream – for example Military MRO services and Civil OEM parts supply – supported by multi-disciplinary teams dedicated to meeting the needs of that particular market or customer group and their platforms, thus optimising the relationship with Ontic.


EnvironmentWe are committed to working in ways that limit the impact of our business activities on the environment and to proactively managing environmental resources.We aim for continuous improvement in environmental performance every year, including the elimination of environmental incidents such as fuel spills. We monitor external developments to ensure that we remain compliant with all environmental legislation (local and national) and watch developing technology – for example solar, alternative fuel vehicles, and sustainable aviation fuel – to understand if they might have practical application at BBA Aviation. Our real estate investment activities have regard to environmental issues and we aim for best practicable environmental performance through design, materials and the inclusion of environmentally friendly systems.Our SHEBBA reporting system collects and records each location’s use of resources such as electricity, natural gas and water. Dashboards within the tool show targets and analyse current performance at each site to drive awareness and engagement amongst our employees who can make a difference on a daily basis.Our Environmental Policy and Approach is available to download from the Corporate Responsibility section of the BBA Aviation website.Environmental performanceBBA Aviation has voluntarily reported on environmental metrics for a number of years and KPIs are normalised for comparison purposes to dollars of revenue. We use the services of an external consultant to review and provide third party verification of the process for collecting and consolidating this data.

A Lektro aircraft tug is inspected prior to a tow. Signature’s fleet of ground support equipment includes a variety of electric vehicles from electric tugs to belt loaders. Signature also uses hybrid electric crew cars at a number of locations.

Ground support equipmentSignature operates a large fleet of ground support equipment (GSE), from fuel trucks to smaller items such as tugs and lavatory and water carts. Availability and viability of alternative technology options for lighter equipment has improved significantly and we have many electric items in our fleet such as tugs, towbarless tractors and belt loaders, which also have a low cost to operate and maintain. At multiple airports in the USA, we are working with the airport authorities and other agencies on strategic plans to convert fully to electric, utilising new state funding. We have an active fuel

truck renewal programme which, in the absence of in-production alternative technology models, is focused on vehicles with low emission, efficient diesel engines.

Alternative fuelsSignature is currently working with a coalition of airlines, aircraft operators and fuel companies on a sustainable aviation fuel initiative at San Francisco International Airport. A commercial supply of sustainable fuel has been identified and tested and it is hoped that Signature will be able to offer the alternative to customers in the future.

The table below shows the disclosures in a format that is consistent with previous disclosures:Units 20181 20172 2016 2015 2014

Electricity consumption KWh/$m revenue 37,255 46,308 49,241 50,676 49,206

GHG emissions CO2e tonnes/$m revenue 29.04 37.46 38.29 53.41 53.42

Water consumption 1,000 litres/$m revenue 121 180 159 203 169

Revenue $m 2,880.9 2,370.6 2,149.1 2,129.8 2,289.81 Data includes Engine Repair and Overhaul. During 2018 we acquired EPIC Aviation and Firstmark Corp.

2018 energy data was not readily available for reporting and is therefore excluded from the 2018 data. Both companies’ data will be incorporated in 2019.

2 2017 recalculated for latest available data.

Greenhouse gas emissions reporting dataWe have reported on all of the emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. All of these sources fall within our consolidated financial statements. We have used the World Business Council for Sustainable Development/World Resources Institute Greenhouse Gas Reporting Protocol Corporate Accounting and Reporting Standard (revised edition), and emission factors from the UK Government’s GHG Conversion Factors for Company Reporting 2018, EPA Emission Factors for Greenhouse Gas Inventories 2018 and EPA Emissions & Generation Resource Integrated Database eGRID2016.Units 20181 20172

Combustion of fuel and operation of facilities 37,021 36,409 tCO2eElectricity, heat, steam and cooling purchased for own use 46,645 52,395 tCO2eTotal GHG emissions 83,666 88,804 tCO2eGHG emissions per $m of revenue 29.04 37.46 tCO2e

1 See footnote 1 above.2 See footnote 2 above.

Recorded total greenhouse gas emissions have decreased relative to 2017. The main contributor to this reduction is the use of updated greenhouse gas emission conversion factors for electricity consumption in the United States and the United Kingdom, where there is a decrease in the greenhouse gas emissions per kilowatt hour of electricity. Electricity consumed by BBA Aviation decreased 2.2% from 2017 to 2018, however greenhouse gas emissions from electricity consumption decreased 11%. 2017 greenhouse gas emissions have been restated based on updated data now available.


CommunitiesWe aim to have a positive impact on our local communities by creating employment, demand for local services, and by encouraging and supporting our teams to contribute to causes they care about.We recognise the benefits of working in partnership with the communities in which we operate, and our sites play an active role in local projects and local and national organisations by supporting educational initiatives, volunteering, fundraising and taking part in events.Our teams are encouraged to focus their efforts on activities and organisations in the fields of aviation, education and STEM (Science, Technology, Engineering and Mathematics) and those that benefit their immediate local areas or that have a specific connection with a site or employee. It is recognised that participating in these efforts engages employees and builds strong teams as well as helping others.Our local efforts are complemented by the BBA Aviation parent company charitable giving programme which, since its launch in 2010, has donated more than $1.8 million to charities and organisations around the world. Twice a year, employees are invited to make recommendations for donations, with applications considered by a committee of peers. Members of the Ontic Cheltenham team clear debris from a local

cycle route as part of a work day with the Sustrans organisation.

In conjunction with the Women in Aviation Palmetto Pride chapter, Signature Charleston (CHS) hosted its second Girls in Aviation Day in 2018. More than 80 girls took part in a range of activities and talks designed to introduce them to the many opportunities available in the aviation sector.

California wildfiresBoth Signature Van Nuys (VNY) and Signature Santa Barbara (SBA) were on hand to support rescue and relief efforts during wildfires this year. In the aftermath of January’s Thomas wildfire and subsequent mudflow event in Montecito, SBA’s main terminal became a triage centre for air-rescued residents of the mudflow area and the location supported around 50 helicopter rescue operations. In the weeks following, with the freeway closed, local pilots volunteered their time to transport emergency responders from other airports to SBA. Signature donated approximately $25k of aviation fuel to support these efforts. During wildfire season VNY becomes the base of operations and fuelling post for Southern California Cal-Fire and its amphibious and tactical firefighting aircraft, including the ‘Super Scooper’, which has been supported by VNY for many years.

Girls in Aviation DayEnsuring that the aviation sector is attractive to women is an important part of creating a diverse, inclusive and successful company. BBA Aviation has strong local links to the Women in Aviation International (WAI) organisation. Signature is a sponsor of its annual conference and provides a scholarship to support a woman pursuing an aviation-related undergraduate or graduate degree. Girls in Aviation Day, held in October, was supported by many of our sites, which set up and participated in special activities for girls in their local communities aged 8–17.

A Canadair CL-215 ‘Super Scooper’ amphibious firefighting aircraft returns to Signature VNY. Signature supported a range of aircraft operating for Cal-Fire during the demanding 2018 California fire season.


Financial matters

Exchange rateBBA Aviation’s revenues, cash flows and balance sheet are principally denominated, and as a result reported, in US dollars. The exchange rates used to translate the key non-US dollar flows and balances were:

2018 2017 2016

Sterling – average 1.33 1.29 1.36

Sterling – spot 1.28 1.35 1.23

Euro – average 1.13 1.13 1.11

Euro – spot 1.11 1.19 1.05

Discontinued operations At the end of May 2018, management committed to a plan to sell substantially all of our Engine Repair and Overhaul business and, as such, at that point the relevant assets and liabilities were classified as held for sale. At that time, as a major line of the Group’s business, the ERO operations were also classified as a discontinued operation. ERO’s revenue increased by $20.3 million to $533.6 million (2017: $513.3 million). In stable markets, ERO’s underlying operating profit as a discontinued operation was up 45.2% to $35.0 million (2017: $24.1 million). ERO’s profit improvement also includes the benefit from a suspension of depreciation and amortisation of $5.2 million for the period from 1 June 2018, the required accounting treatment while the business is held for sale. Also shown in discontinued operations for the prior year ended 31 December 2017 are revenues of $38.4 million and an underlying operating loss of $0.2 million for ASIG, sold to John Menzies plc on 31 January 2017, which generated proceeds of $180.4 million, net of costs.The financial matters that follow represent the Group’s continuing operations unless stated otherwise.

Central costsTotal central costs which includes support costs relating to the discontinued ERO business have decreased in 2018 by $6.7 million to $39.0 million (2017: $45.7 million). Underlying central costs in 2018 (excluding support costs of discontinued operations) were $28.3 million (2017: $34.1 million). This reduction of $5.8 million primarily reflects the comparative period in 2017 being impacted by additional one-time costs incurred in our captive insurance company for the damage to our US and Caribbean facilities in the 2017 hurricanes, the remaining ASIG support costs, now removed from the business.In addition, total central costs now also include $10.7 million of costs to support ERO (2017: $11.6 million) which are not classified within discontinued operations. These costs will be addressed post completion of the ERO disposal and any associated Transitional Support Agreement period.Exceptional and other itemsExceptional and other items are defined in note 2 to the Consolidated Financial Statements. Exceptional and other items after tax, for continuing and discontinued operations, totalled $102.6 million (2017: $127.0 million). Key components of this for continuing operations are the non-cash amortisation of acquired intangibles ($88.8 million) accounted for under IFRS 3, impairment primarily of the Sloulin Field FBO ($14.1 million), restructuring expenses ($8.9 million), and a one off past service pension cost in relation to GMP equalisation ($11.1 million). Exceptional and other items on discontinued operations relate to the conclusion of the restructuring at our ERO Dallas footprint and costs relating to the strategic review and disposal process of the ERO business.


Acquisitions and disposalsDuring 2018 the Group completed seven acquisitions for a total initial consideration of $235.8 million (of which $22.5 million was either deferred or contingent), net of cash acquired. Further details of these acquisitions are given in note 25 to the Consolidated Financial Statements. The acquisitions represented the purchase of EPIC, a leading fuel and fuel related services supplier to an extensive FBO network for a total consideration of $96.2 million and Firstmark, an aerospace focused aftermarket service provider, for a total consideration of $97.4 million and also included Ontic licence acquisitions from Honeywell, Esterline and a UK-based OEM. In addition, the Group acquired a minority stake in the St Thomas Jet Center.2017 included proceeds from disposals of $180.4 million related to the disposal of ASIG, net of costs.InterestNet interest expense for continuing operations increased by $4.8 million to $66.3 million (2017: $61.5 million) and includes a one-time gain of $4.6 million from hedging contracts closed out as part of the refinancing. Interest cover on a covenant basis decreased to 7.9x (2017: 8.4x), due to the higher weighted average interest rate for the Group following the refinancing.Tax and DividendsThe underlying tax rate for continuing operations increased to 21.0% (2017: 18.7%). This increase reflects increases in US state taxes, the non-repeat of prior year adjustments in 2017 and the impact of US tax reform in late 2017.On 22 December 2017, the United States enacted tax reform that implemented substantial changes to the federal tax system by reducing the headline federal tax rate from 35% to 21% and limiting interest deductions to a maximum of 30% of US EBITDA. As a result, the Group incurred a one-time, exceptional charge of $20.5 million in 2017, primarily related to the non-cash revision of US deferred tax assets and liabilities.The Group revalued US deferred tax liabilities at 31 December 2017, primarily relating to amortisation of intangibles to reflect the reduction in headline US tax rates, and wrote off deferred tax assets primarily relating to deferred interest as a result of the tax reform restrictions on interest deductibility, which is now capped at 30% of US EBITDA. In addition, the exceptional tax charge includes a $3.0 million one-time repatriation tax charge on the unremitted earnings of overseas subsidiaries controlled by a US entity. This one-time tax charge is payable over eight years and has minimal impact on the Group’s cash tax rate.

The Group’s cash tax payments for 2018 amounted to $27.1 million (2017: $41.8 million). The significant reduction is largely as a result of non-repeat tax payments made in 2017 relating to taxable gains on the disposal of ASIG. In addition, 2018 cash taxes benefited from the introduction of 100% capital allowances as part of US tax reform.At the time of the interim results, the Board declared an increased interim dividend of 4.00 cents (H1 2017: 3.81 cents). The Board is now proposing a final dividend of 10.07 cents per share (2017: 9.59 cents), up 5.0% on an underlying basis, reflecting the Board’s progressive dividend policy and its continued confidence in the Group’s future growth prospects.PensionsThe Group paid net $5.9 million of pension payments during the period, of which $4.0 million represented pension deficit payments reflecting the agreed payments to the schemes.The most recent actuarial valuation of the UK plan at 31 March 2018 continues to be underway and will be complete by 30 June 2019. The previous actuarial valuation of the UK plan at 31 March 2015 indicated a funding deficit of £45 million ($66 million) at 31 March 2015 exchange rates. The Group paid £4.3 million of pension payments into the UK plan, of which £3.0 million represented pension deficit payments, reflecting the agreed payments to the scheme under an agreement to make additional contributions of £0.3 million per annum, bringing the annual deficit contribution to £3.0 million, and £2.7 million thereafter until 2034 in accordance with the asset-backed funding arrangement established in 2014.As at 31 December 2018, the accounting net deficit across the UK and US plans was $28.2 million (2017: $71.7 million). The reduction in the net deficit of $43.5 million since 31 December 2017 is due to the favourable movements in discount rate assumptions and experience emerging from updating for the membership data used for the 2018 scheme funding valuation.


Cash Flow and DebtAt 31 December 2018 the Group had net debt of $1,332.2 million (2017 net debt: $1,167.1 million), the increase being due to the acquisitions during the year, primarily of EPIC and Firstmark as well as Ontic licences, reflecting the execution of M&A opportunities within our planned capital allocation framework, investing the free cash flow generated by the business. The Group’s net debt to underlying EBITDA ratio at 31 December 2018 was 2.9x on a reported basis (2017: 2.6x on a reported basis) and 2.8x on a covenant basis (2017: 2.6x on a covenant basis). Net cash flow from operating activities of $368.3 million was higher than the prior year (2017: $339.0 million) primarily as a result of improved trading, reduced working capital and lower cash taxes paid. Free cash flow increased by $4.2 million to $224.8 million (2017: $220.6 million) with lower proceeds on disposals of PP&E and higher capital expenditure impacting the drop through from net cash flow from operating activities. Capital expenditure amounted to $91.9 million (2017: $80.3 million). Principal items included the investment in our FBOs at Nashville and Las Vegas, and the construction of a sports charter terminal at our Miami FBO which will support our Signature ELITE ClassTM growth initiative.Other significant cash flow items include the acquisition of businesses, net of cash acquired of $210.6 million (2017: $75.7 million), the proceeds from disposal of ASIG in 2017 of $170.5 million, net of fees, and dividend payments of $140.7 million (2017: $130.7 million). A profile by currency is shown in the table below:(Debt)/Cash profile by currency

$m 2018 2017

US dollars (1,377) (1,221)

Sterling 16 25

Euros 12 18

Others 17 11

Total (1,332) (1,167)

The Group policy with respect to cash deposits is to only have deposits with pre-approved banks with limits on the amounts deposited with each institution dependent on their long-term credit rating. Deposits are generally for short-term maturity (less than three months).

Financial risk management and treasury policiesThe main financial risks of the Group relate to funding and liquidity, interest rate fluctuations and currency exposures. A central treasury department that reports directly to the Group Finance Director and operates according to objectives, policies and authorities approved by the Board, manages these risks.The overall policy objective is to use financial instruments to manage financial risks arising from the underlying business activities and therefore the Group does not undertake speculative transactions for which there is no underlying financial exposure. More details are set out in note 17 to the Consolidated Financial Statements.Funding and liquidityThe Group’s operations are financed by a combination of retained profits, equity and borrowings. Borrowings are generally raised at Group level and then lent to operating subsidiaries. The Group maintains sufficient available committed borrowing facilities to meet its forecasted funding requirements.During the year the Group refinanced its $650 million unsecured multi-currency revolving credit facility (RCF) which was due to mature in April 2019, with a new facility for $650 million which will expire in March 2023. The new RCF has been agreed predominantly with the Group’s existing lenders with an overall weighted average interest cost in line with the previous facility. The new RCF includes an ability to extend the duration for an additional year at the first anniversary of the RCF and again at the second anniversary. These two extension options are at the lenders’ discretion.The Group also issued $500 million senior unsecured notes due 2026 at 5.375%. The proceeds from the issuance of the $500 million senior unsecured notes were used to repay the $253 million Facility B of our acquisition financing and $120 million of US private placement senior notes which matured in May 2018. At 31 December 2018 the Group had $380 million (2017: $500 million) of US private placement senior notes. These debt obligations and facilities are subject to cross-default. In addition, the Group maintains uncommitted facilities for daily working capital fluctuation purposes.At the end of 2018, the Group had committed bank facilities of $1,100 million (2017: $1,353 million) of which $572 million (2017: $818 million) was drawn. The revolving credit facility, the senior unsecured notes, the Acquisition Financing Agreement (AFA) facilities and the US private placement loan notes are subject to two main financial covenants: maximum net debt to underlying EBITDA of 3.5x and minimum net interest cover of 3.0x underlying EBITDA. The Group has operated within these covenants.The rationale for preparing the financial statements on a going concern basis is set out on page 48.


Capital structureFollowing the review of our capital structure, we announced in March 2018 that we had increased our target leverage range based on the strong and robust cash flow fundamentals of the Group. The Group manages net debt in the range of 2.5x to 3.0x underlying adjusted EBITDA which we believe gives flexibility and headroom for the investment requirements of the Group and the cyclicality within the B&GA market, our primary market. The Group has performed within this target range during 2018 with net debt to underlying adjusted EBITDA at 31 December 2018 being 2.8x on a covenant basis, in line with expectations. The new target range provides up to 1.0x headroom against the Group’s net debt to adjusted underlying EBITDA banking covenant.Interest rate risk managementThe interest rate exposure arising from the Group’s borrowing and deposit activity is managed by using a combination of fixed and variable rate debt instruments and interest rate swaps. The Group’s policy with respect to interest rate risk management is to fix portions of debt for varying periods based upon the debt maturity profile and an assessment of interest rate trends. At the end of 2018, approximately 44% (2017: 55%) of the Group’s total borrowings were fixed at weighted average interest rates of 4.2% (2017: 3.5%) for a weighted average period of five years (2017: three years).Currency risk managementThe Group’s policy is to hedge all significant transactional currency exposures through the use of forward currency contracts. The Group’s policy is to draw its borrowings principally in US dollars in order to match the currency of its cash flows, earnings and assets, which are principally denominated in US dollars.


Audit and Risk CommitteeResponsible for reviewing and approving the adequacy and effectiveness of our risk management and internal controls.

Risk managementWe are committed to effective risk management to support delivery of our strategic objectives.

Our risk management process is designed to improve the likelihood of delivering our business objectives, protect the interests of our shareholders and key stakeholders, and enhance the quality of our decision making through the awareness of risk-assessed outcomes. It also assists in the safeguarding of our assets, including people, finances, property and reputation. We are committed to conducting business in accordance with all applicable laws and regulations and in a manner that is consistent with our values.

BBA Aviation’s risk appetite and risk mitigation strategy are matters that are overseen by the Board, with the support of the Audit and Risk Committee, which manages the processes that underpin risk assessment and our systems of internal control.The risk assessment process drives the Internal Audit scope, which is agreed in February each year by the Audit and Risk Committee. The Chief Risk Officer and Head of Internal Audit attend Audit and Risk Committee meetings to provide regular updates and discuss any proposed changes to the plan.

How we manage risk across BBA Aviation

Risk governance structure

The BoardResponsible for our system of corporate governance and overseeing execution of our strategy; risk management and policy; and financial performance.

Executive Management CommitteeResponsible for setting strategic direction, executing strategic decisions, and implementing an effective corporate risk management system.

BusinessesResponsible for identifying, assessing and managing risks within their business subject to Group risk appetite.

Company risk map (risk register) and business risk mapsManagement teams in our businesses and corporate functions review risks through self-assessment methodology and update risk registers. Risk maps are submitted to the Executive Management Committee and the Audit and Risk Committee bi-annually.Re

spon

sibi

lity

for i

mpl

emen

ting

Accountability for monitoring Internal

Audit function

Reviews and reports on the system of internal control.

Chief Risk

OfficerReports on key

risks and risk mitigation.


The Board has established a framework for assessing risk in the context of likelihood and impact in financial and reputational terms. Each risk within the Group is assessed against this framework and the Board reassesses its risk appetite on a bi-annual basis when the Group risk map is presented to the Audit and Risk Committee.Group policies, standards and internal controls, together with our values and our focus on safety, underpin our approach to risk management. We are committed to being a responsible values-led business and our leaders are responsible for embedding this into BBA Aviation’s culture, our decision making and how we work.

Our employees are accountable for working to established standards and for identifying and escalating encountered risks so that they can be appropriately managed. The Group has comprehensive training programmes to ensure that employees are appropriately trained in BBA Aviation’s ethics policies.The bi-annual risk assessment process looks forward three years to create BBA Aviation’s risk profile. These key Group-level risks are input into the scenario modelling for the Viability Statement, which is explained further on page 49.

Risk management process

Business objectivesOur business objectives are established on a five year basis and drive our annual objectives.

Strategic plan development and update Our strategy informs the setting of

shorter-term goals across the Group and is widely communicated.

Execution of the strategic planPortfolio and investment decisions are

made based on resource constraints and risk/reward profiles against our

strategic objectives.

Board and Executive Management Committee reviewProgress is monitored at global and business levels and risks assessed on an ongoing basis as part of the business review and risk management processes.

Bi-annual key and

emerging risk assessment

process

Ongoing key risk

mitigation

Monitor key risk status

Strategic risk

mitigation


We continue to evolve our risk management process to provide practical insight into risks the business is facing. The risk registers have been extended to:• Identify risk velocity – the speed at which a risk may impact us;• Collect emerging risk five and ten years out, which will be a key

input to our strategic planning process.We have also improved the rigour in our data collection and analysis to support the impact evaluation of our key risks. This information is input to the scenario modelling that underpins the Viability Statement (see page 49).Cyber and data breach riskWe have completed a phase of work on cyber risk including an assessment of likely business threats, data protection and information security controls. The cyber case study below explains how our businesses are working together with IT and our corporate functions to manage cyber risk. A Data Privacy Lead reporting to the Group General Counsel will be appointed in 2019 to address our increasing compliance obligations arising from data privacy regulations in the EU and worldwide.

Business continuityWe have undertaken business continuity and crisis management exercises at two of our major Signature FBO locations – Luton, UK and Teterboro, USA – and simulated how we would react to a potential data leak to a competitor at Ontic Chatsworth, California. See page 32 for more details of the Signature exercises.BrexitWe hold a fortnightly call with representatives from our businesses and our tax and legal teams.Any risk that we face concerns any changes to the open skies arrangement that may impact B&GA travel, and a slow-down in customs processes that may lead to delays in the cross-border flow of fuel, materials and engines, both for BBA Aviation, our suppliers and their upstream supply chains, and customers shipping engines to ERO for repair and overhaul. Having considered these risks and in the context of the Group’s flight operations and supply chains being largely outside Europe, we see only limited potential risk.

Cyber securityBBA Aviation faces a range of cyber threats targeting the confidentiality, integrity and availability of our systems and of our data. A successful cyber attack could have a serious and sustained impact on the operation of our businesses, our reputation and relationship with customers and partners, and our financial performance. We therefore have a cyber security strategy in place which emphasises the connections between IT and our operations and ensures that everyone is working together to identify, prevent and remediate threats. There are four planks to our cyber security strategy: Transparency: Automated and current reporting; informed leadership team;Culture: Security conscious culture; information security built into processes;Zero-trust network: Secured devices, encrypted data and traffic, hygiene zones;Risk management: IT partnership with business operations.The strategy and activities associated with it are led by our specialist Information Security team, supported by our Data Protection and Compliance Committee, which comprises senior representatives from our operational and functional teams.During 2018 we conducted a cyber threat analysis in which BBA Aviation’s key external threats were identified as follows: • Espionage activity, primarily targeting Ontic IP but also business-

sensitive data across the Group;

• Cyber criminals attempting to steal money through fraud or steal information to monetise;

• Targeted or non-targeted ransomware disrupting business critical systems;

• Spear phishing attacks against employees (email spoofing seeking unauthorised access to sensitive information).

We have in place a range of mitigating processes and controls to reduce the likelihood and impact of these threats, but it is recognised that the threat environment, and regulations around it, constantly evolve and so must our response.During 2018 we implemented additional end-user protection, including adding Multi-Factor Authentication (MFA) to our Virtual Private Network (VPN) system and to Office 365 and disabling removable media from company machines. We updated our Security Incident Response Process and our Cyber Security Risk Process and set up 24-7 security monitoring using dedicated and shared resources. We replaced Ontic’s end-of-life document control system with a new platform that complies with US Export Control regulations and conducted a table top business continuity management (BCM) exercise at Ontic Chatsworth to test and refine our response to a security breach involving Ontic IP. Finally, across the year, we have worked to raise employee awareness of cyber security issues and embed understanding of reporting requirements and the personal contribution they can make to our efforts, which included launching a new employee Cyber Security Toolkit.

Progress in 2018


We have identified 12 principal risks and uncertainties facing BBA Aviation which are considered by the Board to be material to the development, performance, position or future prospects of the Group. These risks, mitigations and changes during the year are summarised in the table below. They are not set out in priority order. Supply chain disruption has been added to the list in 2018 and managing key resources across major projects removed.

Change during the year

Increasing Stable Declining

Risk Description and potential impact Mitigation action/ControlLink to business model and strategy

Economy Structural changes in the global economic environment, or cycle fluctuations that drive down B&GA and commercial flying, and military expenditure.

• Active monitoring of lead economic indicators.

• Strong financial controls to monitor financial performance and provide a basis for corrective action when required.

• Low fixed costs allow cost base to be flexed to meet demand.

Market-leading assetsRobust and flexible operating modelsDrive operational efficiency and process improvement

Terrorist activity

Global terrorist events either in-flight, at or near major airports materially impacting global air travel.

• Airport and internal access security processes, vetting of potential staff members in recruitment process.

• Low fixed costs allow cost base to be flexed to enable corrective action to be taken.

Market-leading assetsRobust and flexible operating modelsDrive operational efficiency and process improvement

Legislative changes

Legislative changes causing material increase to cost of B&GA flight relative to alternatives such as commercial flying, road or rail travel. In 2018, the major change has been the introduction of General Data Protection Regulation (GDPR).

• Active participation in all relevant industry bodies.

• Ongoing monitoring of all US and EMEA political activity which may impact B&GA activity.

• Internal policies including Data Protection and supporting training ensure GDPR requirements are understood.

Market intelligenceRobust and flexible operating modelsDrive operational efficiency and process improvement

Competitor activity

Ongoing competitor activity to replicate market position of Signature network.

• Active monitoring of competitor activity.• Strong financial controls to monitor

financial performance.

Barriers to entryMarket intelligenceCustomer and partner relationshipsTechnologyFortify network and expand portfolioImprove customer experience

People Ability to attract and retain high-quality and capable people at senior and mid-management levels.

• Succession planning process embedded with review at Executive Management Committee and Board level annually.

• Remuneration structure designed to reward superior performance and promote retention.

• Proactive employee development and key talent retention processes.

Market-leading assetsVision, Mission and Values

continued overleaf >>>

Principal risks


Risk Description and potential impact Mitigation action/ControlLink to business model and strategy

Products and services

Potential liabilities from defects in services and products.

• Standard operating procedures with routine root cause analysis of all incidents.

• Liability insurance.

Customer and partner relationships

Cyber security

Impact of a successful cyber attack. • Operation of a specialist Information Security team.

• Continual refreshment of firewalls and endpoint protection, laptop encryption, mobile device management, intrusion protection, password policy, vulnerability and penetration testing, identity and security event management.

• Cyber insurance added to insurance programme in 2019.

TechnologyDrive operational efficiency and process improvement

Ethics Intentional or inadvertent non-compliance with company values and legislation, both within BBA Aviation and with trading partners.

• Clear values statement and ethical policies.• Semi-annual compliance certification

by all senior management.• Rigorous third party vetting processes.• Robust internal control environment and

regular review by internal and external audit.

Vision, Mission and ValuesGovernance

Environment Environmental exposures. • Strong procedural controls and physical containment when working with fuel or other hazardous chemicals.

• Active management of known environmental matters to minimise costs to resolve.

• Environmental insurance where appropriate.

Vision, Mission and ValuesDrive operational efficiency and process improvement

Banking covenants

Non-compliance with banking covenants caused by a tighter regulatory environment around sanctions compliance, which is a key condition of our banking covenants.

• Strong treasury management controls concerning liquidity management.

• Rigorous third party vetting processes, which includes compliance with sanctions regulations.

Vision, Mission and ValuesGovernance

Tax Changes in tax regulation in both the USA and EMEA could impact our effective tax rate and our cash tax liabilities.

• Timely compliance with all international tax requirements.

• Continuous monitoring of changes to tax legislation, taking advice where appropriate from reputable professional advisers.

Supply chain disruption

Delay in delivery of parts from multi-tiered supply chains operating across multiple countries

• Regular business reviews with major suppliers that address horizontal supply chain issues.

• Mitigate single sources of supply where able or incorporate supply agreements that provide protection against loss and interruption.

Customer and partner relationshipsDrive operational efficiency and process improvement


Non-financial Information Statement The table below, and information in this Annual Report which it refers to, is intended to assist our stakeholders in understanding our position on key non-financial matters.

Reporting requirement Policies and guidelines governing our approach1 Risk management and additional information Associated KPIs

Environmental matters

• Approach to Corporate Responsibility • Environmental Policy and Approach• Safety Management System• Safety Business Plans

A responsible business p30Environment p36Principal risks p46

Environmental performance p36Greenhouse gas emissions p36

Employees • Approach to Corporate Responsibility • Code of Business Ethics• Equal Opportunities and

Anti-Harassment Guidelines• Training Attendance Policy• Family Friendly Policies (UK)• Health and Safety Policy and Approach• Safety Management System• Safety Business Plans• Data Protection Policy

A responsible business p30Our people p33Safety and Security p31Risk management p42Principal risks p45

Recordable Incident Rate p31Number of locations achieving zero RIR p31Percentage of women employed p33

Social matters • Approach to Corporate Responsibility• Community Involvement and

Charitable Giving Framework• Global Tax Strategy

A responsible business p30Customers, partners and suppliers p35Communities p37Principal risks p46

Human rights • Approach to Corporate Responsibility • Code of Business Ethics• Equal Opportunities and

Anti-Harassment Guidelines• Third Party Vetting Policy• Code of Ethics for Suppliers,

Contractors and Consultants• Data Protection Policy

Our people p33Human rights p34Customers, partners and suppliers p35

Anti-corruption and anti-bribery

• Policy on Bribery and Corruption

• Code of Business Ethics• Disclosure of Unethical Conduct Policy• Code of Ethics for Suppliers,

Contractors and Consultants

Customers, partners and suppliers p35Principal risks p46

Description of the business model

• Business model p8

1 Certain Group policies and guidelines are not published externally.


Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report and Directors’ Report on pages 1–95. The financial position of the Group, its cash flows and liquidity position are described on pages 38–41. In addition, note 17 to the Consolidated Financial Statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.The Group’s committed bank facilities comprise a $650 million multi-currency revolving credit facility (RCF) dated 26 March 2018 due to expire in March 2023 and an Acquisition Financing Agreement (AFA) put in place during 2015 to fund the acquisition of Landmark Aviation in conjunction with the rights issue. Following the prepayment of Facility B in April 2018, from the proceeds of the issuance of $500 million senior unsecured notes due 2026, there remains one acquisition term debt facility. The remaining term debt facility is Facility C due to expire in September 2020. In addition to prepaying Facility B, during the year the Group used the proceeds from the $500 million senior notes issuance to fund the repayment of $120 million US private placement notes, which expired in May 2018, and drawings under the $650 million RCF. There have been no prepayments under Facility C of the AFA and, therefore, as at 31 December 2018 the full amount of $450 million remains outstanding.In addition, BBA Aviation plc has US private placement (USPP) obligations of $380 million senior notes with various maturity dates between 2021 and 2026. In total, the Group has debt obligations and facilities of $1,980 million and, as at 31 December 2018, the Group has available $528 million of undrawn committed borrowing facilities. These debt obligations and facilities are subject to cross default. Further details relating to these debt arrangements are provided in note 16 to the Consolidated Financial Statements. The bank facilities and the USPP notes are subject to two main financial covenants: maximum net debt to underlying EBITDA of 3.5x; and minimum net interest cover of 3.0x underlying EBITDA. The directors expect the Group to comply with these covenants for the foreseeable future.

The Group’s forecasts and projections taking account of reasonably possible changes in trading performance show that the Group should be able to operate within the level of its current facilities for the foreseeable future. The principal risks and uncertainties affecting the forecasts and projections, to which the Group is exposed, relate to the number of hours of flying activity, principally in Business & General Aviation, but also to a lesser extent in commercial and military aviation. Flying hours largely dictate the drivers of revenue, namely fuel volumes in Signature, engine overhaul cycles in ERO and demand for components in Ontic. Further details of these risks and uncertainties are provided on pages 42–46.The directors have carried out a critical review of the Group’s 2019 budget and medium-term plans with due regard for the risks and uncertainties to which the Group is exposed and the impact that these could have on trading performance, including the matters set out in viability assessment opposite. The key assumptions used in constructing the budget were as follows:• In Signature we anticipate growth in Signature and EPIC, driven by

market outperformance and effective strategic initiatives against the backdrop of a flat B&GA market with modest medium-term market growth.

• Ontic’s outlook remains positive with a strong order backlog and the recent Firstmark acquisition providing a solid foundation for continued growth in the business.

• ERO is forecast to continue to deliver robust performance and improved cash conversion in a competitive market and pricing environment. The business is held for sale.

• In addition, our overall performance will be supported by further incremental contributions from the substantial investments made across the Group in recent years. Over the longer term, the underlying strengths of our market-leading businesses, the continuing improvement in their operational performance and the structural growth and consolidation in our major markets support the Board’s confidence in the Group’s ability to generate superior through-cycle returns.

The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.


Viability Statement

Long term prospectsIn accordance with provision c.2.2 of the UK Corporate Governance Code, the directors have assessed the financial and operational position and prospects of the BBA Aviation Group. This assessment was based on the three-year financial forecast for the BBA Aviation Group which was prepared on a business by business basis alongside the BBA Aviation Group annual budget and strategic planning processes.The Group’s current position provides a strong foundation for future growth as outlined in the Group’s strategy on page 10. Signature is a market leader with an unrivalled global network of FBOs secured on long leaseholds providing sustainable competitive advantage, whilst Ontic delivers a scalable proposition with strong return on invested capital, a diversified product portfolio and sole source revenue from IP controlled rights. Viability assessmentThe directors consider the three-year period to December 2021 to be the appropriate viability assessment period based on the historic performance of the Group and its key underlying markets. The directors have given consideration to the levels of uncertainty within the global economic and political environment and to the risks faced by the Group and believe a three-year period remains the optimal balance of long-term projections and acceptable forecasting accuracy. In making their assessments the directors have considered the potential financial and operational impacts of severe yet plausible scenarios that could impact the three-year financial performance of the Group. The plausible scenarios considered are broadly aligned to the principal risks and uncertainties set out on pages 42–46, and incorporate both external factors such as a downturn in the B&GA market and internal factors such as the ineffectiveness of planned strategic initiatives. Consideration has been given to Brexit, in particular in the context of supply chain risk in the discontinued ERO business, and the relative significance of this compared to the Group’s US operations.

In their assessment of the impact of plausible scenarios on the Group, the directors have also considered the likely effectiveness of available mitigating actions such as the deferral of non-essential capital expenditure across the forecast period.In particular, in making their statement the directors have given consideration to scenarios including the following assumptions:• market contraction in 2019 across the B&GA, commercial and

military markets;• core portfolio decline across Ontic and ERO due to increased market

competition and margin pressures;• unfavourable changes in tax legislation in both the USA and EMEA

driving increased effective tax rates and cash tax liabilities; and• increased cost of debt as a result of unfavourable changes to the

global economic and political environments.Based on this assessment, the directors have a reasonable expectation that the Company and the BBA Aviation Group will be able to continue in operation and meet their liabilities as they fall due for the three-year period to December 2021.

This Strategic Report was approved by the Board of Directors on 4 March 2019 and is signed on its behalf by:

Mark Johnstone, David Crook,Group Chief Executive Officer Group Finance Director4 March 2019 4 March 2019

Documents

Annual Report 2018 - Signature Aviation/media/Files/S/... · sectors of the global aviation market. Ontic is a leading provider of high-quality, OEM-licensed aviation parts and maintenance,