Flat interims from aviation support and aftermarket services specialist BBA Aviation (BBA) are compounding declines at the £1.38 billion cap which has seen stock fall 18.4% on the year-to-date.

Today's fall of 2.4% to 293.8p comes on the back a 5% drop in first half revenue to £1.09 billion. A disappointing performance in the group's aftermarket services division offset some of the good work done in flight support and while the group's profit before tax for the six months to the end of June was unchanged from the same period 12 months earlier, operating profit nevertheless nudged 3% higher to £130.2 million.


BBA's flight support division provides specialist on-airport services including refuelling and ground handling to the business and general aviation market through Signature Flight Support and to the commercial aviation market through ASIG. Revenue in flight support may have decreased by 10% to $700.0 million but underlying operating profit in that division increased by 19% to $79.4 million, supported by strong operational delivery. During the period, acquisitions completed in 2014 contributed $7.3 million to operating profit.

Turning to aftermarket services, revenue increased by 6% to $396.4 million but underlying operating profit of $25.2 million decreased by 33%. This decline was due principally to Engine Repair and Overhaul (ERO) where, according to BBA, 'markets were highly competitive and we experienced materially greater than anticipated throughput inefficiencies associated with the footprint rationalisation programme.' In addition to these headwinds, there were some start-up costs related to the Pratt & Whitney rotorcraft authorisations ERO signed last year.

Broker Jeffries maintains a 'Buy' recommendation with a 376p price target on the basis that flight support should continue improve while cost inefficiencies at ERO should be confined to the first half of the year.

Issue Date: 05 Aug 2015