Shares in aviation services firm BBA Aviation (BBA) have dropped 4% to 302p after it reported a dip in pre-tax profit and earnings per share in the six months to 30 June.
BBA provides a variety of services to the airline industry, including maintenance and refuelling. That give it more insulation from many of the issues that typically dog the airline operators, such as rising fuel costs, overcapacity and industrial action.
Consquently, BBS's share price has performed strongly this year, rallying around 30%. That compares to to double-digit declines for budget flyer pair EasyJet (EZJ) and Ryanair (RYA), and similar for British Airways-owner International Consolidated Airlines (IAG).
But there’s only so far that can go before industry issues catch up with the likes of BBA, as today’s results show.
RESULTS NOT UP TO SCRATCH
Underlying pre-tax profit on a continuing basis fell 2% to $132m, though revenue was up 19% to $1.26bn. Earnings per share fell 3% to $0.10.
AJ Bell investment director Russ Mould said, ‘The company uses the dreaded term ‘broadly’ in line with expectations to describe the numbers, code for not quite up to scratch.
‘This, in part, reflects exposure to struggling European airlines, and the weak performance here explains why the company is so focused on the US for future growth.’
READ MORE ABOUT BBA AVIATION HERE
Last week, BBA agreed a deal to sell its parts business, Ontic, to a private equity buyer CVC for $1.36bn. BBA chief executive Mark Johnstone said the company will now be focused on its ‘cash generative’ Signature business.
Signature, which accounts for 83% of the firm’s underlying operating profit, provides in-airport services like refuelling and aircraft line maintenance.
'ALL THE ATTENTION' NOW ON SIGNATURE
Organic revenue in the division grew just 0.4%, while its return on invested capital remained effectively flat at 11.7%, while operating cash flow was also down when considered on the basis before the new IFRS 16 accounting rules came into force.
Mould added that ‘all the attention’ will now be on BBA’s Signature business following the sale of Ontic.
He said, ‘As such investors may not have been too impressed by the modest decline in return on capital, weaker cash flow and limited organic growth served up by this business.’
