TIDMBBA

RNS Number : 8162H

BBA Aviation PLC

05 August 2019

BBA Aviation plc

2019 Interim Financial Report

Unaudited results for the half year ended

30 June 2019

For further information please contact:

David Crook, Group Finance Director (020) 7514 3999

Kate Moy, Investor Relations

BBA AVIATION PLC

David Allchurch / Lisa Jarrett-Kerr (020) 7353 4200

TULCHAN COMMUNICATIONS

A video with Mark Johnstone, Group Chief Executive, and David Crook, Group Finance Director, is now available on www.bbaaviation.com

A live audio webcast of the analyst presentation will be available from 08:30 today on www.bbaaviation.com

INTERIM FINANCIAL REPORT FOR PERIODED 30 JUNE 2019

Highlights(1)

-- Total Group underlying operating profit, on a pre IFRS 16 basis, grew 5.3% to $190.0 million (H1 2018: $180.5 million); Signature FBO network outperformed the US B&GA market

   --      Proposed sale of Ontic to CVC for $1,365 million announced on 30 July 2019 
   --      Continuing operations: 

o Signature

-- Organic revenue up 0.4% (Signature FBO up 1.0%) with new commercial initiatives contributing to outperformance against a strong prior year comparative

-- US B&GA market growth of 0.3% in the six months to June 2019

-- Underlying Signature FBO operating profit on a pre-IFRS 16 basis reduced 2.6% to $156.4 million (H1 2018: $160.5 million) in a flat H1 US B&GA market with reduced heavy jet traffic in our network

-- EPIC acquisition delivered $2.9 million operating profit for six months as expected, with card and network fuel benefits to come from H2 19 onwards

o Ontic

-- Underlying operating profit growth on a pre IFRS 16 basis increased to $31.7 million (H1 2018: $24.5 million), driven by good organic growth and the Firstmark acquisition

-- Further licence signed with Meggitt in the period

-- Firstmark acquisition integrating well and proceeding to plan

   --      Discontinued operations: 

o Engine Repair and Overhaul (ERO) delivered underlying operating profit performance of $18.8 million on a pre IFRS 16 basis (H1 2018: $13.4 million) through robust trading with the benefit of depreciation and amortisation suspension

-- Group statutory operating profit is up 21.7% at $156.0 million (H1 2018: $128.2 million) due to the adoption of IFRS 16 on 1 January 2019

-- Total Group free cashflow up 12.8% to $129.2 m (H1 2018: $114.5 million) highlighting inherently strong free cash flow generation

-- Leverage stable at 2.8x net debt/underlying EBITDA on a covenant basis, well within our target range of 2.5-3.0x, reflecting continued strong free cash flow generation funding Ontic licence investment in the period and our progressive dividend

   --      Total Group ROIC on a pre IFRS 16 basis is flat at 11.4% (Dec 2018: 11.4%) 

-- Underlying Total Group adjusted basic EPS (pre IFRS 16) decreased by 3% to 11.3c (2018: 11.7c). Total Group basic EPS (pre IFRS 16) decreased by 43.1% to 3.7c (2018: 6.5c) reflecting higher exceptional and other item charges

-- Interim dividend increased by 5% to 4.2c reflecting continued confidence in the Group's future growth prospects and free cash generation.

Mark Johnstone, BBA Aviation Group Chief Executive, commented:

"The first half of 2019 has been broadly in line with our expectations for BBA Aviation, with a solid Signature performance, in a flat B&GA market. Our Ontic legacy business has delivered a strong performance.

We are pleased to have advanced our new commercial initiatives in Signature including a successful fuel RFP and increasing the EPIC fuel card penetration within the Signature owned network.

Ontic's first half performance was ahead of expectations, with strong organic growth driven primarily by our GE licence portfolios. Ontic continues to see a strong pipeline of licence opportunities and we invested $23.6 million during the period.

On 30 July we were delighted to announce the proposed sale of Ontic to CVC for a consideration of $1,365 million which represents a compelling transaction multiple which we believe fully recognises the strategic value and strong growth track record for the business.

Looking forward, Signature is focused on maintaining its level of performance against the US B&GA market in the second half. Post the proposed disposals, BBA Aviation will be focused on the cash generative Signature business which will enable us to maintain our progressive dividend policy, coupled with the prospect of returns to shareholders as we maintain our target leverage range. The Board is confident of delivering market outperformance through our Signature strategic growth initiatives."

 
Underlying 
 results(1)                        H1 2019                     H1 2018 
  $m                     Total       Continuing(5)   Total       Continuing   % Change(2) 
                          Group                       Group 
 ---------------------  ----------  --------------  ----------  -----------  ------------ 
  Revenue                1,528.1     1,262.7         1,281.9     1,024.3      19% 
  EBITDA (Pre IFRS 16)   229.8       211.0           222.0       204.9        4% 
  Operating profit 
   (Pre 
   IFRS 16)              190.0       171.2           180.5       167.1        5% 
  Profit before tax 
   (Pre 
   IFRS 16)              150.2       132.0           153.1       140.2        (2)% 
  Basic adjusted EPS 
   (Pre 
   IFRS 16)              11.3c       10.0c           11.7c       10.7c        (3)% 
  Return on invested 
   capital(4,6) 
   (Pre IFRS 16)         11.4%                       11.4%                    - 
  Free cash flow         129.2       107.2           114.5       159.8        13% 
  Net debt (Pre IFRS 
   16 
   basis) (6)            (1,341.1)                   (1,332.2)                7% 
 ---------------------  ----------  --------------  ----------  -----------  ------------ 
 
 
 
 Statutory 
 results                        H1 2019                     H1 2018 
  $m                     Total       Continuing(5)   Total       Continuing   % Change(2) 
                          Group                       Group 
 ---------------------  ----------  --------------  ----------  -----------  ------------ 
  Revenue                1,528.1     1,262.7         1,281.9     1,024.3      19% 
 =====================  ==========  ==============  ==========  ===========  ============ 
  EBITDA                 287.9       263.0 
  IFRS 16 impact         (70.9)      (64.8) 
  EBITDA (Pre IFRS 16)   217.0       198.2           213.2       197.2        2% 
 =====================  ==========  ==============  ==========  ===========  ============ 
  Operating profit       156.0       131.1 
  IFRS 16 impact         (26.7)      (20.6) 
  Operating profit 
   (Pre 
   IFRS 16)              129.3       110.5           128.2       115.9        1% 
 =====================  ==========  ==============  ==========  ===========  ============ 
  Profit before tax      47.3        57.5 
  IFRS 16 impact         9.5         13.8 
  Profit before tax 
   (Pre 
   IFRS 16)              56.8        71.3            83.0        76.2         (32)% 
 =====================  ==========  ==============  ==========  ===========  ============ 
  Basic unadjusted 
   EPS(3)                3.0c        4.5c 
  IFRS 16 impact         0.7c        1.0c 
  Basic unadjusted 
   EPS(3) 
   (Pre IFRS 16)         3.7c        5.5c            6.5c        6.0c         (43)% 
 =====================  ==========  ==============  ==========  ===========  ============ 
  Dividend per share     4.20c                       4.00c                    5% 
 =====================  ==========  ==============  ==========  ===========  ============ 
 
  Net debt               (2,537.3) 
  IFRS 16 impact         1,196.2 
  Net debt (Pre IFRS 
   16)(6)                (1,341.1)                   (1,332.2)   -            7% 
 ---------------------  ----------  --------------  ----------  -----------  ------------ 
 

(1) Underlying results represent alternative performance measures (APM), see APM section in note 19 outlining all such measures. Where applicable and for comparability these are presented on a pre IFRS 16 basis

(2) % change based on total (including discontinued operations)

(3) Statutory measure is basic earnings per share (EPS)

(4) ROIC is calculated on a pre IFRS 16 basis as there is no full 12 months of operating profit on an IFRS 16 basis

(5) Ontic's performance is presented as a continuing operation, consistent with its position at the balance sheet date

(6) 2018 return on invested capital and net debt is shown for the full year ended 31 December 2018

NOTE ON IFRS 16:

As previously noted we have adopted the modified retrospective approach available within the new accounting standard and therefore we have not restated our comparative disclosures for the impact of IFRS 16, which came into effect from 1 January 2019. The statutory results have been split out to show the IFRS 16 impact to aid comparison period on period.

We reiterate that the adoption of IFRS 16 has no impact on the economic prospects, strategy, cash generative nature of our business, our progressive dividend policy or our stated capital allocation policy.

At adoption on 1 January 2019, and for this interim period, IFRS16 does significantly impact several key financial metrics with regard to reported performance, financial position, financing costs and associated financial leverage.

The approach we have taken to ensure consistency and comparability is to report APMs (non-GAAP metric) that convert and reconcile IFRS 16 reported financials back to the historical accounting treatment of leases. This historical accounting treatment of leases is the basis on which we are tested under our banking covenants, plus monitor performance, KPIs and remuneration targets.

INTERIM RESULTS 2019

Overview

Overall BBA Aviation performed broadly in line with our expectations, with Signature growing ahead of a flat US B&GA market and strong organic and inorganic growth in our Ontic business. We have made further progress with the implementation of our strategy and delivered as expected from our recent acquisitions of EPIC, Firstmark and from the Ontic licence acquisitions acquired in 2018.

Continuing Group revenue increased by 23.3% to $1,262.7 million (H1 2018: $1,024.3 million) including a $230.2 million contribution from the acquisition of EPIC and a $21.4 million contribution from Ontic licence acquisitions and Firstmark.

-- Signature revenue increased 23.3%, reflecting the six-month contribution from EPIC, partially offset by the impact of lower fuel prices ($10.7 million) and foreign exchange movements ($6.6 million). Organic growth in the Signature FBO business was 1.0%.

-- Ontic revenue increased by 28.2% with organic revenue growth of 8.0% supplemented by the contribution from the 2018 licence acquisitions and Firstmark (H1 2019: $16.4 million) contributing as expected.

Continuing Group underlying operating profit (on a pre IFRS 16 basis) was $171.2 million (H1 2018: $167.1 million).

-- Underlying operating profit performance in Signature, on a pre IFRS 16 basis, was $160.0 million (H1 2018: $163.7 million) which includes a $2.9 million contribution from EPIC.

-- Ontic delivered strong underlying operating profit, on a pre IFRS 16 basis, of $31.7 million (H1 2018: $24.5 million) which includes a $5.3 million contribution from the Firstmark acquisition and $1.4m from new licences

   --      Total central costs were broadly flat at $20.5 million (H1 2018: $20.5 million). 

Continuing group statutory operating profit increased 13.1% to $131.1 million (H1 2018: $115.9 million) primarily due to the adoption of IFRS 16 on 1(st) January 2019.

Our Engine Repair and Overhaul (ERO) business performed well, delivering strong underlying operating profit performance of $18.8 million on a pre IFRS 16 basis, a 40.3% increase on the $13.4 million in H1 2018, through robust trading with the benefit of $5.9 million depreciation and amortisation suspension.

Net interest for the continuing operations, including the impact of IFRS 16, was $73.6 million (H1 2018: $26.9 million). The increase of $46.7 million results primarily from the adoption of IFRS 16, with the introduction of net interest on lease liabilities of $34.4 million. The increase in underlying net interest on a pre IFRS 16 basis is as expected and primarily reflects the revised debt structure implemented in April 2018.

Net debt on a reported basis increased to $2,537.3 million (FY 2018: $1,332.2 million) following the adoption of IFRS 16 which results in the recognition of additional $1,196.2 million in lease liabilities within the definition of net debt. Our banking covenants are tested on the accounting standards in force at the time the debt financing was secured, consequently they are not impacted by the adoption of IFRS 16. Net debt to underlying EBITDA on a covenant basis was flat at 2.8x on a covenant basis (FY 2018: 2.8x). Interest cover on a covenant basis decreased to 6.5x for the 12 months to June 2019 (FY 2018: 7.9x).

Continuing underlying profit before tax (on a pre IFRS 16 basis) was $132.0 million (H1 2018: $140.2 million). The decrease primarily results from the additional net interest costs following the revision to our debt structure in April 2018. Statutory profit before tax for the continuing Group was $57.5 million (H1 2018: $76.2 million). The decrease arose principally from the adoption of IFRS 16 and the increased net interest on debt partially offset by lower levels of exceptional and other items charged.

The Group's underlying tax rate for continuing operations was 21.5% (H1 2018: 21.0%). Cash taxes paid increased in line with expectations to $23.0 million (H1 2018: $10.2 million). This increase largely represents timing of payments between 2018 and 2019.

Adjusted earnings per share (on a pre IFRS 16 basis) for continuing operations was 10.0c (H1 2018: 10.7c).

Statutory earnings per share for continuing operations decreased to 4.5c (H1 2018: 6.0c) principally as a result of the impairment recognised on ERO and the adoption of IFRS 16.

Exceptional and other items after tax, for continuing and discontinued operations, totalled $78.5 million (H1 2018: $54.3 million) of which $32.5 million (H1 2018: $5.0 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 ($47.9 million), restructuring expenses ($1.4 million), and provisions in respect of previously disposed businesses of ($10.4 million). Exceptional and other items on discontinued operations of $32.5 million, net of tax, relate to the impairment of ERO net assets, to fair value less costs to sell, and transaction costs relating to the disposal process of the ERO business.

Total Group free cash flow increased 13% to $129.2 million (H1 2018: $114.5 million). This improvement resulted from a partial turnaround in working capital within our ERO business following the significant working capital outflows in H1 2018. Free cash flow for the continuing Group reduced to $107.2 million (H1 2018: $159.8 million), primarily as a result of the expected payment of additional interest ($16.9 million) and additional tax payments ($12.8 million) and a working capital inflow in the prior year.

Gross capital expenditure for the total Group amounted to $41.1 million (H1 2018: $43.1 million). Principal capital expenditure items include investment in Signature's FBO developments at Teterboro, and Palm Beach.

Cash flows on exceptional and other items were an outflow of $1.8 million (H1 2018: $12.2 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 $2.3 million of pension scheme payments (H1 2018: $2.2 million). During H1 2019 the Group completed and signed off the 2018 actuarial review of its UK defined benefit pension scheme. Net interest payments were $38.4 million (H1 2018: $21.5 million) and dividend payments amounted to $103.9 million (H1 2018: $99.3 million).

Total spend on acquisitions and licences completed during the period was $26.5 million (H1 2018: $27.7 million), which included deferred consideration on a Meggitt licence acquired in December 2018, the acquisition of a new licence from Meggitt in June and the final working capital settlements in respect of EPIC and Firstmark.

Total Group Return on Invested Capital (ROIC) on a pre IFRS 16 basis was flat at 11.4% (FY 2018: 11.4%).

Business Review - Continuing Operations

Signature (83% of continuing operations' underlying operating profit, pre IFRS 16)

Signature ("Signature FBO", "TechnicAir" and "EPIC") provides specialist on-airport services including refuelling, ground handling and line maintenance to the business & general aviation (B&GA) market.

 
 H1 2019                          Signature   TechnicAir      EPIC      Total 
                                        FBO 
  $m 
 Revenue(2)                           879.1         33.2     230.2    1,142.5 
 Organic revenue growth                1.0%      (13.8)%         -       0.4% 
 Underlying operating profit          176.7          0.7       2.9      180.3 
   Underlying operating profit 
    (Pre IFRS 16)                     156.4          0.7       2.9      160.0 
 Constant fuel margin                20.1 %         2.1%     1.3 %     15.8 % 
   Constant fuel margin (Pre 
    IFRS 16)                         17.8 %        2.1 %     1.3 %     14.0 % 
 Statutory operating profit                                             142.7 
 EBITDA                                                                 256.2 
   EBITDA (Pre IFRS 16)                                                 193.1 
 Operating cash flow                                                    234.9 
   Operating cash flow (Pre 
    IFRS 16)                                                            174.1 
 Divisional return on invested 
  capital                                                               11.7% 
 
 H1 2018                          Signature   TechnicAir   EPIC(3)      Total 
                                        FBO 
  $m 
 Revenue                              887.5         38.8         -      926.3 
 Organic revenue growth                4.8%        10.8%                 5.0% 
 Underlying operating profit 
   Underlying operating profit 
    (Pre IFRS 16)                     160.5          3.2         -      163.7 
 Constant fuel margin 
   Constant fuel margin (Pre 
    IFRS 16)                          18.3%         8.1%         -      17.7% 
 Statutory operating profit                                             126.0 
 EBITDA 
   EBITDA (Pre IFRS 16)                                                 194.8 
 Operating cash flow 
 Operating cash flow (Pre 
  IFRS 16)                                                              197.8 
 Divisional return on invested 
  capital(1)                                                            11.8% 
 
 Period on period change          Signature   TechnicAir      EPIC      Total 
  $m                                    FBO 
 Revenue                             (0.9)%      (14.4)%         -      23.3% 
 Organic revenue growth              (3.8)%      (24.6)%               (4.6)% 
 Underlying operating profit 
   Underlying operating profit 
    (Pre IFRS 16)                    (2.6)%      (78.1)%         -     (2.3)% 
 Constant fuel margin 
   Constant fuel margin (Pre        (50)bps     (600)bps         -   (390)bps 
    IFRS 16) 
 Statutory operating profit                                             13.3% 
 EBITDA 
   EBITDA (Pre IFRS 16)                                                (0.9)% 
 Operating cash flow 
 Operating cash flow (Pre 
  IFRS 16)                                                            (12.0)% 
 Divisional return on invested                                       (10) bps 
  capital 
 

(1) Return on invested capital for full year 2018

(2) Revenue is stated pre IFRS 16, Signature revenue post IFRS 16 was $1,140.4 million (H1 2018: $926.3 million)

(3) EPIC acquired 1 July 2018

Signature FBO revenue increased 1.0% on an organic basis against a strong prior year comparator. On a reported basis revenue was down 0.9% to $879.1 million (H1 2018: $887.5 million) as a result of lower fuel prices of $10.7 million and foreign exchange movements of $6.2 million. This was delivered against a backdrop of US B&GA movements (source: FAA) which were up 0.3% for the six months to June 2019, representing outperformance of 70 basis points. Heavy jet traffic (over 5k gallon uplifts) was down within our Signature network, which has limited our ability to outperform the overall US B&GA market at our usual levels.

We continue to believe the US B&GA market is a long-term structural growth market, correlated with US GDP growth. Uncertainty around the US trade tariffs, Gulf tensions and a slowdown in China continues to impact business confidence, and the reduction in discretionary flying, which has been most notable in our charter customer segment, continues. Furthermore, we have experienced challenges, in what has been a low growth market, as the long tail value behaviours become more pronounced.

European B&GA movements were down 4.7% in H1 2019 (source: WingX) and while Europe is a small part of Signature, this has clearly impacted overall performance, although encouragingly we saw a much-improved performance in June.

The underlying operating profit in our Signature FBO business for the six months ended June 2019 (on a pre IFRS 16 basis) was down 2.6% to $156.4 million (H1 2018: $160.5 million) as the positive impact from fuel and non-fuel commercial initiatives were offset by wage and other cost inflation that we were unable to fully pass on in a flat market. We remain confident in Signature's ability to deliver significant longer-term value creation across our enlarged network, supported by the commercial growth investments made during 2018 and the phased implementation of the strategic growth initiatives presented at the Capital Markets Day in November 2018.

The underlying operating margin, on a pre IFRS 16 basis, in Signature FBO was 17.8% (2018 on a constant fuel price basis: 18.3%) and reflects the wage inflation experienced in a tight US labour market.

TECHNICAir continued to face challenges in the first half of 2019 with organic revenue decline of 14.4% to $33.2 million (H1 2018: $38.8 million) as we rationalised the footprint from 15 locations down to 8. Underlying operating profit on a pre IFRS 16 basis decreased to $0.7 million (H1 2018: $3.2 million) albeit when compared to H2 2018 the performance was broadly flat. Going forward, TECHNICAir is a smaller but lower risk business given the actions being taken on the fixed cost base.

EPIC contributed revenues of $230.2 million and underlying operating profit of $2.9 million, on a pre IFRS 16 basis, for the first six months of 2019. The integration of EPIC is progressing in line with expectations and in the period, we have made good progress on the fuel card penetration within the Signature network.

Signature's overall revenue, which includes our Signature FBO business, our line maintenance business TECHNICAir and EPIC, increased by 23.3% to $1,142.5 million (H1 2018: $926.3 million) on a pre IFRS 16 basis. The EPIC acquisition contribution was $230.2 million and Signature's organic revenue increased by 0.4%.

Statutory operating profit of $142.7 million increased by 13.3% (H1 2018: $126.0 million) primarily due to the adoption of IFRS 16.

Operating cash flow for Signature, on a pre IFRS 16 basis, decreased to $174.1 million (H1 2018: $197.8 million), principally due to working capital outflows. Return on invested capital decreased to 11.7% (FY 2018: 11.8%).

Our FBO network

There are 193 locations in Signature's global network, including 16 Signature Select(R) franchise locations. The acquisition of EPIC added 202 privately owned, EPIC branded independent FBOs and a further 121 unbranded locations. This creates a total network of over 400 FBO locations, which has significantly extended Signature's network relevance and the range of services it can offer.

Signature Strategic growth initiatives

In the current low growth US B&GA market we have continued to invest in our Signature FBO network and have started to capture benefits from the recent investments in new technology, designed to enhance our fuel and non-fuel revenue management capabilities through enhanced EPoS and revenue optimisation tools.

EPIC acquisition

EPIC 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. Our existing Signature Select(R) branded locations are complementary to EPIC's FBO locations and have now been incorporated/folded into the EPIC network to operate alongside our market-leading owned FBO network.

Pre-acquisition, EPIC was our Signature FBO fuel card partner and the acquisition has given Signature full end-to-end management of this card programme, associated transaction processing and data capture, as a platform for an enhanced service offering across our entire owned and non-owned network. As communicated at the Capital Markets Day we believe that deeper penetration of this branded fuel card, within our Signature network, represents a $4-8 million underlying operating profit opportunity over time. We are pleased to have made good initial progress on increasing own card usage in the first six months of 2019, which has now grown to over 5% in the Signature FBO network.

EPIC's proprietary QTPod technology for self-fuelling AvGas services is performing very well. We have made good progress as QTPod expands its footprint in the aviation industry, with a new generation proprietary and cloud based self-serve fuelling systems.

Fuel RFP

We have recently concluded our biennial fuel RFP on the combined Signature and EPIC gallons, which total over 500 million gallons per annum. This new agreement took effect on 1 July 2019. We are pleased to announce that the new deal creates c.$7 million of cost savings on a full year basis. As previously noted, in the current tight US labour market the benefits of this new deal will be used to mitigate some of the impact of the higher wage costs.

Leveraging our network

In the current low growth B&GA market, we will continue to drive value through leveraging Signature's unique network of FBOs by a combination of organic growth, core revenue optimisation, non-fuel revenue growth incorporating new services and improved asset utilisation. We are focused 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. On the cost side we are about to roll out labour efficiency benchmarking across the US network.

With regard to new services that will contribute over the next few years, we have made positive initial progress on a US roll-out of the ELITE Class(TM) (our commercial passenger interconnect service). We believe this is further evidence of Signature redefining the market reach for B&GA infrastructure.

Over time, we will look to leverage the increased opportunity in advertising throughout our real estate, which builds on our unique customer group that controls significant wealth. Through this range of growth opportunities, over the medium term we will target enhanced market outperformance of some 250 basis points above US B&GA FAA movement growth.

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.

Uber Elevate partnership

With a view to remaining at the forefront of industry developments, we have recently partnered with Uber Elevate to facilitate ground-based operations to support skyport infrastructure for UberAIR, which plans to operate a network of electric air taxis in cities worldwide. These electric vertical take-off and landing vehicles (eVTOLs) differ from helicopters as they are quieter, safer, more affordable and more environmentally-friendly. This partnership will leverage Signature's leading scale, distribution and aviation expertise with Uber's innovative services and technology leadership to forge a vision for the future of transportation. Signature will also be the ground-based operator of choice for Uber's helicopter services in Manhattan.

Ontic (17% of continuing operations' underlying operating profit, pre IFRS 16)

Ontic, the Group's legacy support business is focused on the support of maturing aerospace platforms.

 
 $m                                H1 2019   H1 2018    % Change 
 
 Revenue(2)                          122.3      95.4       28.2% 
 Underlying operating profit          31.7         -           - 
   Underlying operating profit 
    (Pre IFRS 16)                     31.7      24.5       29.4% 
 Underlying operating margin         25.9%         -           - 
   Underlying operating margin 
    (Pre IFRS 16)                    25.9%     25.7%      20 bps 
 Statutory operating profit           21.0      17.8       18.0% 
 EBITDA                               36.5         -           - 
   EBITDA (Pre IFRS 16)               35.6      28.7       24.0% 
 Operating cash flow                  28.5         -           - 
 Operating cash flow (Pre 
  IFRS 16)                            27.7      25.5        8.6% 
 Divisional ROIC(3)                  15.4%     15.6%    (20) bps 
 

(1) Note: Our former Aftermarket Services business ERO (Middle East) is included under Ontic for H1 2018 in Note 2 Segmental Analysis but is excluded from the table above to provide a directly comparable analysis of the Ontic business only. In H1 2018 the ERO (Middle East) business contributed revenue of $2.7 million and an underlying operating loss of $0.6 million.

(2) No IFRS 16 impact

(3) Return on invested capital for full year 2018

Ontic revenue increased by 28.2% to $122.3 million (H1 2018: $95.4 million). On an organic basis, which adjusts for FX of $(2.0) million and the contribution from Ontic licence acquisitions acquired within the last twelve months and Firstmark of $21.4 million, revenue increased by 8.0% driven by a strong performance from our GE license portfolio.

Underlying operating profit on a pre IFRS 16 basis of $31.7 million increased by 29.4% (H1 2018: $24.5 million) driven by the contribution from the Firstmark acquisition, which added $5.3 million, and Ontic licence acquisitions acquired within the last 12 months of $1.4 million. On an organic basis, excluding FX of $0.8 million and acquisitions of $6.7 million, Ontic's underlying operating profit increased 5.5%. Underlying operating margins improved to 25.9% (H1 2018: 25.7%).

Statutory operating profit of $21.0 million was up 18.0% (H1 2018: $17.8 million).

There was an operating cash inflow for the division of $27.7 million (H1 2018: $25.5 million) on a pre IFRS 16 basis, driven by working capital performance. Return on invested capital was 15.4 % (FY 2018: 15.6%).

Ontic Strategic growth initiatives

New licence acquisitions

In June 2019 we were pleased to sign a new licence with Meggitt Sensors, part of Meggitt plc, for signal conditioners, military chip detectors, cockpit indicators and connector harnesses. These products are used on a range of commercial, B&GA and military platforms.

This licence agreement follows on from the Meggitt licence signed in December 2018 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 both agreements 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 for the large installed base. This further enhances our relationship with Meggitt and highlights our capability to strategically assist OEM partners with on-going support of their non-core products.

Furthermore, in late June we signed a small licence with a new relationship OEM, Thales UK Limited, to acquire manufacturing and aftermarket rights for the complete family of doppler velocity sensors. This licence will transition into our Cheltenham facility during the second half of 2019.

Our total cash spend on licence acquisitions was $23.6 million (H1 2018: $22.5 million) which includes deferred consideration of $10.0 million paid in January 2019 for the December 2018 licence acquisition from Meggitt.

Firstmark Corp acquisition

We completed the acquisition of Firstmark Corp, an aerospace focused aftermarket service provider, in November 2018. 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 has enhanced 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.

Post Balance Sheet Event

BBA is pleased to announce that it has entered into an agreement to sell Ontic, a leading provider of high-quality, OEM-licensed parts for legacy aerospace platforms, to CVC Fund Vll, for a cash consideration of $1,365 million on a cash-free and debt-free basis.

The Transaction is a Class 1 transaction for BBA under the Listing Rules and is therefore conditional upon the approval of shareholders. A circular containing further details of the Transaction, together with a notice to convene a general meeting expected to be in late August 2019 (General Meeting), will be sent to shareholders as soon as is practicable.

The Board believes the price agreed for Ontic fully recognises the strategic value of Ontic's strong brand, attractive returns and significant growth potential. The Board intends to use some of the disposal proceeds to reduce the Group's financial indebtedness to help ensure that the net debt of the Retained Group remains near the lower end of the stated target range of net debt to underlying adjusted EBITDA of 2.5 to 3.0 times on a covenant basis at 31 December 2019, following Completion. After taking into account these deployments of the disposal proceeds, the Board expects to return between $750m and $850m to the Company's shareholders. Further details on the Board's current expectations regarding the use of proceeds and the proposed return of capital to the Company's shareholders will be set out in the Circular.

The Company will also work with the Group's Pension Trustee to obtain its consent to release applicable security.

Central costs

Total central costs, which includes support costs relating to the discontinued ERO business, on a pre IFRS 16 basis are flat at $20.5 million (H1 2018: $20.5 million). Underlying central costs were broadly flat in H1 2019 (excluding support costs of discontinued operations) at $15.1 million (H1 2018: $14.8 million).

The costs associated with supporting the ERO business will be addressed post completion of the ERO disposal or upon completion of the associated Transitional Support Agreement period, as appropriate.

Business Review - Discontinued Operations

As previously announced, at the end of May 2018 management committed to a plan to sell substantially all our ERO 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. The ERO (Middle East) business has now ceased trading and is not part of the disposal process.

In the six months to 30 June 2019 ERO's revenue increased by 9.6% to $282.4 million (H1 2018: $257.6 million) on a pre IFRS 16 basis. In stable markets, ERO's underlying operating profit on a pre IFRS 16 basis was $18.8 million (H1 2018: $13.4 million). ERO's underlying operating profit improvement includes the $5.9 million benefit from the suspension of depreciation and amortisation for the six months to 30 June 2019 compared to a benefit of $0.7 million for H1 2018, this being the required accounting treatment while the business is held for sale. In the period an impairment charge of $32.5 million, net of tax, was taken on the net assets of ERO, to reflect fair value less costs to sell and transaction costs, relating to the disposal process.

The ERO disposal process is ongoing and we expect to update the market in due course. Disposal proceeds would provide an opportunity to further enhance our proposed return on capital.

Pensions

The Group's net defined benefit pension and other post-retirement benefits liabilities increased by $4.5 million in the first half from $28.2 million at 31 December 2018 to $32.7 million at 30 June 2019. The increase in the net deficit of $4.5 million since 31 December 2018 is primarily due to lower discount rate assumptions.

During H1 2019 the Group completed and signed off the 2018 actuarial valuation of its UK defined benefit pension plan. As a result of this valuation and the initial recognition of past service liabilities in line with the recent High Court ruling in the Lloyds Banking Group case on Guaranteed Minimum Pension (GMP) equalisation we have agreed to make additional payments of GBP8.5 million in total between July 2019 and September 2021.

Dividend

The Board is declaring an increased interim dividend of 4.20c (H1 2018: 4.00c) up 5% reflecting the Board's progressive dividend policy and its continued confidence in the Group's future growth prospects.

A dividend reinvestment plan is in operation. Those shareholders who have not elected to participate in this plan, and who would like to participate, please register via the share portal www.signalshares.com. The deadline for elections is 5:30pm on 7 October 2019.

Board Changes

As previously announced, in January 2019 we welcomed two new non-executive Directors, Vicky Jarman and Stephen King, to the Board. Vicky started her career with KPMG where she qualified as a Chartered Accountant. Shortly after qualification Ms Jarman moved to Lazard & Co working in the Corporate Finance team before becoming Chief Operating Officer for the London and Middle East operations until 2009. Ms Jarman is currently a non-executive director at Knight Frank, the global commercial and residential real estate advisor, and previously held non-executive appointments at De La Rue, Equiniti Group and Hays.

Stephen qualified as a Chartered Accountant with Coopers & Lybrand and has held a number of finance roles in blue chip organisations including Lucas Industries plc, Seeboard plc, De La Rue plc and Caledonia Investments plc, where he was Group Finance Director for nine years. Mr King is currently a non-executive director of Chemring Group plc and TT Electronics where he is the Senior Independent Director and also chairs the Audit Committee.

Susan Kilsby, Chairman of the Remuneration Committee, retired from the Board at the AGM in May. Peter Ventress has taken over from Susan as Chairman of the Remuneration Committee and as our Senior Independent Director. Stephen King has replaced Peter Ventress as the Chairman of the Audit and Risk Committee.

Outlook

In 2019, we are pleased with the progress we have made on our strategic initiatives, against a largely flat US B&GA market which we had anticipated. In Signature, our ongoing investments in commercial decision making and technology, and the EPIC acquisition, will help underpin the future growth and longer-term market outperformance of our business.

We remain focused on improving both our efficiency and also our level of performance against the US B&GA market in the second half of 2019.

The Group is focused on high quality, high ROIC and strongly cash generative businesses which will enable us to grow and deliver shareholder value within our target leverage range of 2.5x to 3.0x. The strong cash generative nature of the core Signature business supports both a progressive dividend policy and the prospect of further returns to shareholders. Additionally the Group has planned capital returns from both the proposed sales of Ontic and ERO.

Going concern

The Directors have carried out a review of the Group's trading outlook and borrowing facilities, with due regard to the risks and uncertainties to which the Group is exposed, the uncertain economic climate, including Brexit (the impact of which is not expected to be significant) and the impact that this could have on trading performance. Based on this review, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

Directors' responsibilities

The Directors confirm that to the best of their knowledge:

a) the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

b) the interim financial report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and,

c) the interim financial report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Signed on behalf of the Board,

Mark Johnstone David Crook

Group Chief Executive Officer Group Finance Director

2 August 2019 2 August 2019

This interim financial report contains forward-looking statements including, without limitation, statements relating to: future demand and markets of the Group's products and services; research and development relating to new products and services; liquidity and capital; and implementation of restructuring plans and efficiencies. These forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Accordingly, actual results may differ materially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changes in interest and exchange rates, in tax rates or tax legislation, commodity prices and other economic conditions; negotiations with customers relating to renewal of contracts and future volumes and prices; events affecting international security, including global health issues and terrorism; changes in regulatory environment; the introduction or variation of tariffs or duties; and the outcome of litigation. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. This interim financial report has been drawn up and presented in accordance with and in reliance on applicable English company law and the liabilities of the directors in connection with this report shall be subject to the limitations and restrictions provided by such law

This report is available in electronic format from the Company's website www.bbaaviation.com

Unaudited condensed consolidated income statement

 
 
 
 
 
                                                          Six months ended                           Six months ended                     Year ended 31 December 
                                                              30 June 2019                               30 June 2018                                       2018 
------------------  ------  ----------------------------------------------  -----------------------------------------  ----------------------------------------- 
                                                     Exceptional                             Exceptional                                Exceptional 
                                                       and other                               and other                                  and other 
                             Underlying(1)                 items     Total   Underlying(1)         items        Total   Underlying(1)         items        Total 
 
                      Note              $m                    $m        $m              $m            $m           $m              $m            $m           $m 
------------------  ------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Continuing operations 
 Revenue               2           1,262.7                     -   1,262.7         1,024.3             -      1,024.3         2,347.3             -      2,347.3 
 Cost of sales                     (978.0)                     -   (978.0)         (770.2)             -      (770.2)       (1,825.3)             -    (1,825.3) 
------------------  ------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Gross profit                        284.7                     -     284.7           254.1             -        254.1           522.0             -        522.0 
 Distribution 
  costs                              (4.9)                     -     (4.9)           (5.1)             -        (5.1)          (13.7)             -       (13.7) 
 Administrative 
  expenses             3            (91.0)                (47.9)   (138.9)          (84.1)        (43.5)      (127.6)         (170.6)        (88.8)      (259.4) 
 Other operating 
  income                               2.1                     -       2.1             1.3             -          1.3             1.3             -          1.3 
 Share of profit 
  of associates and 
  joint ventures                       1.6                     -       1.6             1.7             -          1.7             4.0             -          4.0 
 Other operating 
  expenses             3             (0.7)                (11.4)    (12.1)           (0.8)             -        (0.8)           (2.8)        (14.9)       (17.7) 
 Restructuring 
  costs                3                 -                 (1.4)     (1.4)               -         (7.7)        (7.7)               -         (8.9)        (8.9) 
 Operating 
  profit/(loss)      2, 3            191.8                (60.7)     131.1           167.1        (51.2)        115.9           340.2       (112.6)        227.6 
 Impairment 
  of assets                              -                     -         -               -        (12.8)       (12.8)               -        (14.1)       (14.1) 
 Investment 
  income                               1.2                     -       1.2             0.3             -          0.3             0.7             -          0.7 
 Finance costs                      (74.8)                     -    (74.8)          (27.2)             -       (27.2)          (67.0)             -       (67.0) 
------------------  ------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) before 
  tax                                118.2                (60.7)      57.5           140.2        (64.0)         76.2           273.9       (126.7)        147.2 
 Tax 
  (expense)/credit   3, 4           (25.4)                  14.7    (10.7)          (29.5)          14.7       (14.8)          (57.6)          29.1       (28.5) 
------------------  ------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) 
  from continuing 
  operations                          92.8                (46.0)      46.8           110.7        (49.3)         61.4           216.3        (97.6)        118.7 
 Discontinued operations 
 Profit/(loss) 
  from ERO 
  discontinued 
  operations, 
  net of tax         3, 16            17.1                (32.5)    (15.4)            10.3         (5.0)          5.3            24.2         (5.0)         19.2 
------------------  ------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) for 
  the period                         109.9                (78.5)      31.4           121.0        (54.3)         66.7           240.5       (102.6)        137.9 
--------------------------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 Attributable 
  to: 
 Equity holders 
  of BBA Aviation 
  plc                                109.7                (78.5)      31.2           121.0        (54.3)         66.7           240.2       (102.6)        137.6 
 Non-controlling 
  interests                            0.2                     -       0.2               -             -            -             0.3             -          0.3 
--------------------------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) for 
  the period                         109.9                (78.5)      31.4           121.0        (54.3)         66.7           240.5       (102.6)        137.9 
--------------------------  --------------  --------------------  --------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 
 
                                                          Six months ended                           Six months ended                     Year ended 31 December 
                                                              30 June 2019                               30 June 2018                                       2018 
 Earnings/(loss)     Note      Adjusted(1)                      Unadjusted     Adjusted(1)                 Unadjusted     Adjusted(1)                 Unadjusted 
  per share 
------------------  ------  --------------  ------  ----------------------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Total Group 
 Basic                   6           10.7c                            3.0c           11.7c                       6.5c           23.3c                      13.4c 
 Diluted                 6           10.5c                            3.0c           11.6c                       6.4c           23.1c                      13.2c 
 Continuing operations 
 Basic                   6            9.0c                            4.5c           10.7c                       6.0c           21.0c                      11.5c 
 Diluted                 6            8.9c                            4.5c           10.6c                       5.9c           20.8c                      11.4c 
 Discontinued 
  operations 
 Basic                  16            1.7c                          (1.5c)            1.0c                       0.5c            2.3c                       1.9c 
 Diluted                16            1.6c                          (1.5c)            1.0c                       0.5c            2.3c                       1.8c 
------------------  ------  --------------  ------------------------------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 

(1) Underlying results and adjusted earnings per share are stated before exceptional and other items and include the impact of IFRS 16 which was adopted on 1 January 2019. Exceptional and other items are disclosed in note 3.

Alternative performance measures are reconciled to IFRS measures and are explained in note 19, the Alternative Performance Measures section. For comparability and where applicable, this also includes a reconciliation to a pre IFRS 16 basis.

Unaudited condensed consolidated statement of comprehensive income

 
 
                                                 Six months       Six months         Year ended 
                                                   ended 30         ended 30        31 December 
                                                  June 2019        June 2018               2018 
                                          Note           $m               $m                 $m 
---------------------------------------  -----  -----------  ---------------  ----------------- 
 Profit for the period                                 31.4             66.7              137.9 
 
 Other comprehensive income/(loss) 
 Items that will not be reclassified 
  subsequently to profit or loss 
 Actuarial (losses)/gains on defined 
  benefit pension schemes                             (6.2)             25.2               51.2 
 Tax charge relating to components 
  of other comprehensive income/(loss) 
  that will not be reclassified 
  subsequently to profit or loss           4            0.9            (5.4)              (9.0) 
---------------------------------------  -----  -----------  ---------------  ----------------- 
                                                      (5.3)             19.8               42.2 
---------------------------------------  -----  -----------  ---------------  ----------------- 
 
 Items that may be reclassified subsequently 
  to profit or loss 
 Exchange difference on translation 
  of foreign operations                              (12.4)           (24.4)             (27.5) 
 Fair value movements in assets 
  classified as financial instruments 
  through other comprehensive income                      -                -              (1.8) 
 Fair value movements in foreign 
  exchange cash flow hedges                           (0.5)            (3.8)              (2.9) 
 Transfer to profit or loss from 
  other comprehensive income on 
  foreign exchange cash flow hedges                     0.3              0.9              (1.0) 
 Fair value movement in interest 
  rate cash flow hedges                                 5.2            (4.1)                5.9 
 Transfer to profit or loss from 
  other comprehensive income on 
  interest rate cash flow hedges                      (1.7)              4.9              (6.3) 
 Tax relating to components of 
  other comprehensive income that 
  may be subsequently reclassified 
  to profit or loss                        4            0.6              0.4                1.7 
---------------------------------------  -----  -----------  ---------------  ----------------- 
                                                      (8.5)           (26.1)             (31.9) 
---------------------------------------  -----  -----------  ---------------  ----------------- 
 
 Other comprehensive (loss)/income 
  for the period                                     (13.8)            (6.3)               10.3 
---------------------------------------  -----  -----------  ---------------  ----------------- 
 
 Total comprehensive income for 
  the period                                           17.6             60.4              148.2 
---------------------------------------  -----  -----------  ---------------  ----------------- 
 
 Attributable to: 
 Equity holders of BBA Aviation 
  plc                                                  17.4             60.4              147.9 
 Non-controlling interests                              0.2                -                0.3 
---------------------------------------  -----  -----------  ---------------  ----------------- 
                                                       17.6             60.4              148.2 
---------------------------------------  -----  -----------  ---------------  ----------------- 
 

Unaudited condensed consolidated balance sheet

 
 
                                                  As at       As at          As at 
                                                30 June     30 June    31 December 
                                                   2019        2018           2018 
                                       Note          $m          $m             $m 
------------------------------------  -----  ----------  ----------  ------------- 
 
 Non-current assets 
 Goodwill                                       1,193.1     1,120.6        1,191.1 
 Other intangible assets                        1,293.0     1,263.2        1,329.4 
 Property, plant and equipment                    765.4       779.7          779.9 
 Right of use assets                    7       1,065.1           -              - 
 Interests in associates 
  and joint ventures                               52.2        41.4           53.5 
 Trade and other receivables                       55.3        18.0           18.8 
------------------------------------  -----  ----------  ----------  ------------- 
                                                4,424.1     3,222.9        3,372.7 
------------------------------------  -----  ----------  ----------  ------------- 
 Current assets 
 Inventories                                      137.8       110.7          120.3 
 Trade and other receivables                      257.0       208.2          260.2 
 Cash and cash equivalents              8         116.7       147.6          109.3 
 Tax recoverable                                    0.9         0.3            1.1 
 Assets held for sale                   16        430.8       369.0          407.6 
------------------------------------  -----  ----------  ----------  ------------- 
                                                  943.2       835.8          898.5 
------------------------------------  -----  ----------  ----------  ------------- 
 Total assets                           2       5,367.3     4,058.7        4,271.2 
------------------------------------  -----  ----------  ----------  ------------- 
 
 Current liabilities 
 Trade and other payables                       (406.7)     (415.4)        (439.2) 
 Tax liabilities                                 (35.2)      (38.5)         (39.8) 
 Lease liabilities                      9        (57.9)       (0.2)          (1.1) 
 Borrowings                             8             -       (0.7)          (1.5) 
 Provisions                                      (24.2)      (27.9)         (23.0) 
 Liabilities held for sale              16      (188.0)     (109.5)        (146.8) 
------------------------------------  -----  ----------  ----------  ------------- 
                                                (712.0)     (592.2)        (651.4) 
------------------------------------  -----  ----------  ----------  ------------- 
 Net current assets                               231.2       243.6          247.1 
------------------------------------  -----  ----------  ----------  ------------- 
 
 Non-current liabilities 
 Borrowings                             8     (1,486.2)   (1,337.7)      (1,436.6) 
 Trade and other payables 
  due after one year                              (1.4)       (7.8)          (7.6) 
 Pensions and other post-retirement 
  benefits                              15       (32.7)      (44.5)         (28.2) 
 Deferred tax liabilities                       (161.1)     (141.8)        (162.8) 
 Lease liabilities                      9     (1,073.9)       (1.1)          (3.2) 
 Provisions                                      (34.3)      (38.4)         (37.2) 
------------------------------------  -----  ----------  ----------  ------------- 
                                              (2,789.6)   (1,571.3)      (1,675.6) 
------------------------------------  -----  ----------  ----------  ------------- 
 Total liabilities                      2     (3,501.6)   (2,163.5)      (2,327.0) 
------------------------------------  -----  ----------  ----------  ------------- 
 Net assets                             2       1,865.7     1,895.2        1,944.2 
------------------------------------  -----  ----------  ----------  ------------- 
 
 Equity 
 Share capital                          17        510.0       509.3          509.3 
 Share premium account                          1,594.5     1,594.5        1,594.5 
 Other reserve                                    (7.2)       (5.4)          (7.2) 
 Treasury reserve                               (102.5)      (95.2)         (95.3) 
 Capital reserve                                   61.1        53.6           56.2 
 Hedging and translation 
  reserves                                      (104.8)     (100.4)        (105.7) 
 Retained earnings                               (87.6)      (62.9)          (9.9) 
------------------------------------  -----  ----------  ----------  ------------- 
 Equity attributable to equity holders 
  of BBA Aviation plc                           1,863.5     1,893.5        1,941.9 
 Non-controlling interest                           2.2         1.7            2.3 
------------------------------------  -----  ----------  ----------  ------------- 
 Total equity                                   1,865.7     1,895.2        1,944.2 
------------------------------------  -----  ----------  ----------  ------------- 
 
 

Details of the restatement made to the opening retained earnings as at 1 January 2019 due to the adjustment arising on the adoption of IFRS 16 can be found in note 1 and note 20.

Unaudited condensed consolidated cash flow statement

 
                                                   Six months   Six months     Year ended 
                                                     ended 30     ended 30    31 December 
                                                    June 2019    June 2018           2018 
                                            Note           $m           $m             $m 
-----------------------------------------  -----  -----------  -----------  ------------- 
 Operating activities 
 Net cash flow from operating activities     11         273.3        177.1          368.3 
 
 Investing activities 
 Interest received                                        0.3          0.3           12.7 
 Interest received on sublease                            0.9            -              - 
  assets 
 Receipt of capital element of                            1.3            -              - 
  sublease assets 
 Dividends received from joint 
  ventures and associates                                 2.9          1.7            2.0 
 Purchase of property, plant and 
  equipment                                            (34.9)       (40.1)         (85.3) 
 Purchase of intangible assets(1)                       (7.2)        (4.2)          (7.8) 
 Proceeds from disposal of property, 
  plant and equipment                                     3.6          0.3            4.7 
 Acquisition of businesses, net 
  of cash/(debt) acquired                    13        (25.5)       (21.3)        (210.6) 
 Investment in joint ventures and 
  associates                                                -            -         (10.0) 
 Investment in assets classified 
  as financial instruments measured 
  through other comprehensive income 
  (FVTOCI)                                                  -        (5.2)          (5.0) 
-----------------------------------------  -----  -----------  -----------  ------------- 
 Net cash (outflow)/inflow from 
  investing activities                                 (58.6)       (68.5)        (299.3) 
-----------------------------------------  -----  -----------  -----------  ------------- 
 
 Financing activities 
 Interest paid                                         (38.7)       (21.8)         (70.9) 
 Interest element of lease liabilities 
  paid                                                 (37.2)            -          (0.1) 
 Dividends paid                              5        (103.9)       (99.3)        (140.7) 
 Gains/(losses) from realised foreign 
  exchange contracts                                      5.5        (2.7)            4.5 
 Proceeds from issue of ordinary 
  shares net of issue costs                               0.7          0.3            0.3 
 (Purchase)/sale of own shares 
  (2)                                                   (2.8)        (5.4)          (5.5) 
 Increase/(decrease) in loans                            23.3         26.8          117.1 
 Payments of lease liabilities                         (36.1)            -          (0.4) 
 Decrease in overdrafts                                 (1.5)        (3.3)          (2.3) 
-----------------------------------------  -----  -----------  -----------  ------------- 
 Net cash outflow from financing 
  activities                                          (190.7)      (105.4)         (98.0) 
-----------------------------------------  =====  ===========  ===========  ============= 
 
 Increase/(decrease) in cash and 
  cash equivalents                                       24.0          3.2         (29.0) 
 Cash and cash equivalents at beginning 
  of the period                                         111.3        153.5          153.5 
 Exchange adjustments                                   (9.5)        (6.7)         (13.2) 
-----------------------------------------  -----  -----------  -----------  ------------- 
 Cash and cash equivalents at end 
  of the period                                         125.8        150.0          111.3 
-----------------------------------------  -----  -----------  -----------  ------------- 
 Comprised of: 
     Cash and cash equivalents at 
      end of the period                                 116.7        147.6          109.3 
     Cash included in Assets held for sale 
      at end of the period (note 16)                      9.1          2.4            2.0 
 
 
 

(1) Purchase of intangible assets includes $1.0 million (30 June 2018: $1.2 million; 31 December 2018: $1.2 million) paid in relation to Ontic licences not accounted for as acquisitions under IFRS 3.

(2) (Purchase)/sale of shares includes the share purchases for the share buy-back scheme, shares purchased for the Employee Benefit Trust and shares purchased for employees to settle their tax liabilities as part of the share schemes.

Unaudited condensed consolidated statement of changes in equity

 
                                        Share      Share    Retained       Other             Non-controlling     Total 
                                      capital    premium    earnings    reserves     Total         interests    equity 
                                           $m         $m          $m          $m        $m                $m        $m 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Balance at 1 January 
  2019 pre IFRS 16                      509.3    1,594.5       (9.9)     (152.0)   1,941.9               2.3   1,944.2 
 Adoption of IFRS 16(1)                     -          -         5.3           -       5.3                 -       5.3 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Balance at 1 January 
  2019 after adoption                   509.3    1,594.5       (4.6)     (152.0)   1,947.2               2.3   1,949.5 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Profit for the period                      -          -        31.2           -      31.2               0.2      31.4 
 Other comprehensive loss 
  for the period                            -          -      (10.0)       (3.8)    (13.8)                 -    (13.8) 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Total comprehensive income/(loss) 
  for the period                            -          -        21.2       (3.8)      17.4               0.2      17.6 
 Dividends                                  -          -     (103.9)           -   (103.9)                 -   (103.9) 
 Issue of share capital                   0.7          -           -           -       0.7                 -       0.7 
 Movement on treasury 
  reserve                                   -          -           -       (2.8)     (2.8)                 -     (2.8) 
 Credit to equity for 
  equity-settled share-based 
  payments                                  -          -           -         4.8       4.8                 -       4.8 
 Changes in non-controlling 
  interest                                  -          -           -           -         -             (0.3)     (0.3) 
 Tax on share-based payment 
  transactions                              -          -         0.1           -       0.1                 -       0.1 
 Transfer to retained 
  earnings                                  -          -       (0.4)         0.4         -                 -         - 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Balance at 30 June 2019                510.0    1,594.5      (87.6)     (153.4)   1,863.5               2.2   1,865.7 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 
 Balance at 1 January 
  2018                                  509.0    1,594.5      (50.1)     (121.7)   1,931.7               1.5   1,933.2 
 Profit for the period                      -          -        66.7           -      66.7                 -      66.7 
 Other comprehensive income/(loss) 
  for the period                            -          -        20.2      (26.5)     (6.3)                 -     (6.3) 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Total comprehensive income/(loss) 
  for the period                            -          -        86.9      (26.5)      60.4                 -      60.4 
 Dividends                                  -          -      (99.3)           -    (99.3)                 -    (99.3) 
 Issue of share capital                   0.3          -           -           -       0.3                 -       0.3 
 Movement on treasury 
  reserve                                   -          -           -       (5.4)     (5.4)                 -     (5.4) 
 Credit to equity for 
  equity-settled share-based 
  payments                                  -          -           -         5.7       5.7                 -       5.7 
 Changes in non-controlling 
  interest                                  -          -           -           -         -               0.2       0.2 
 Tax on share-based payment 
  transactions                              -          -         0.1           -       0.1                 -       0.1 
 Transfer to retained 
  earnings                                  -          -       (0.5)         0.5         -                 -         - 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Balance at 30 June 2018                509.3    1,594.5      (62.9)     (147.4)   1,893.5               1.7   1,895.2 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 
 Balance at 1 January 
  2018                                  509.0    1,594.5      (50.1)     (121.7)   1,931.7               1.5   1,933.2 
 Profit for the period                      -          -       137.6           -     137.6               0.3     137.9 
 Other comprehensive income/(loss) 
  for the period                            -          -        43.9      (33.6)      10.3                 -      10.3 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Total comprehensive income 
  (loss) for the period                     -          -       181.5      (33.6)     147.9               0.3     148.2 
 Dividends                                  -          -     (140.7)           -   (140.7)             (0.3)   (141.0) 
 Issue of share capital                   0.3          -           -           -       0.3                 -       0.3 
 Movement on treasury 
  reserve                                   -          -           -       (5.5)     (5.5)                 -     (5.5) 
 Credit to equity for 
  equity-settled share-based 
  payments                                  -          -           -         8.2       8.2                 -       8.2 
 Tax on share-based payment 
  transactions                              -          -         0.5           -       0.5                 -       0.5 
 Change in non-controlling 
  interests                                 -          -       (0.5)           -     (0.5)               0.8       0.3 
 Transfer to retained 
  earnings                                  -          -       (0.6)         0.6         -                 -         - 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 Balance at 31 December 
  2018                                  509.3    1,594.5       (9.9)     (152.0)   1,941.9               2.3   1,944.2 
----------------------------------  ---------  ---------  ----------  ----------  --------  ----------------  -------- 
 

(1) Further information on the restatement of opening retained earnings as at 1 January 2019 due to the impact of adopting IFRS 16 is outlined in note 1 and note 20.

Notes to the condensed consolidated half yearly financial statements

1. Basis of preparation

The unaudited condensed consolidated financial statements of BBA Aviation plc (the "Group"), for the six months ended 30 June 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct Authority and International Accounting Standard IAS 34: Interim Financial Reporting (IAS 34) which permits the presentation of the financial information on a condensed basis. These condensed consolidated half yearly financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, and therefore should be read in conjunction with the Group's Annual Report for the year ended 31 December 2018.

The Group's annual financial statements for the year ended 31 December 2018 have been reported upon by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

These condensed consolidated half yearly financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) endorsed for use in the European Union and the Companies Act 2006 and comply with Article 4 of the EU IAS Regulation. There is a new standard effective in the period which has had a material impact on the condensed consolidated interim financial statements. The Group adopted IFRS 16 from 1 January 2019 and further details of the impact of the accounting standards is referred to below.

Going concern

The directors are satisfied that, at the time of approving the condensed consolidated financial statements, it is appropriate to continue to adopt the going concern basis of accounting. Further information is given on page 10 of the interim statement.

Alternative Performance Measures (APMs)

In the reporting of financial information, the directors have adopted various Alternative Performance Measures (APMs). The Group's results are principally discussed on an 'adjusted' and/or 'underlying' basis. Results on an adjusted basis are presented before exceptional and other items. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measures.

Alternative Performance Measures are reconciled to IFRS measures and explained in Note 19, the Alternative Performance Measures section.

For comparability with prior periods, the financial information disclosed in Note 20 is presented excluding the impact of adoption of IFRS 16. Note 19 presents APMs on a pre and post IFRS 16 basis with a reconciliation to the equivalent statutory measure.

New financial reporting requirements

IFRS 16 Leases

The Group adopted IFRS 16 leases from 1 January 2019. IFRS 16 replaced IAS 17 'Leases' and IFRIC 4 'Determining whether an arrangement contains a lease'.

IFRS 16 requires lessees to account for most contracts under an on-balance sheet model, with the distinction between operating and finance leases removed. In addition, the standard makes changes to the definition of a lease to focus on, amongst other things, which party has the right to direct the use of the asset.

The Group has applied the modified-retrospective transition method approach and consequently the comparatives have not been restated. A one off transitional impact on reserves has been recorded as a result of recognising finance lease subcontracts under the standard. The impact on reserves is set out in the unaudited condensed consolidated statement of changes in equity.

The Group's weighted average incremental borrowing rate applied to lease liabilities as at 1 January 2019 was 6.7%.

Practical expedients adopted on transition

On initial adoption, the Group has elected to use the following practical expedients permitted under the standard:

   --      The application of a single discount rate to a portfolio of leases with reasonably similar characteristics 

-- IFRS 16 has been applied to contracts that were previously classified as leases under IAS 17 and IFRIC 4

-- Right of use assets have been adjusted by the carrying amount of onerous lease provisions at 31 December 2018 instead of performing impairment reviews under IAS 36

Practical expedients also exist to not recognise lease liabilities for short term or low value leases, however on transition the Group has elected not to adopt these expedients.

Significant judgements applied in the adoption of IFRS 16 included determining an incremental borrowing rate where the rate implicit in a lease could not be readily determined.

Impact on lessee accounting

Former operating leases

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off-balance sheet.

Applying IFRS 16, the Group now recognises right of use assets and lease liabilities in the consolidated balance sheet, initially measured at the present value of the future lease payments.

Lease incentives are recognised as part of the measurement of the right of use asset whereas under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of rental expenses on a straight-line basis.

Under IFRS 16, right of use assets will be tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.

Under IFRS 16 the Group recognises depreciation of right of use assets and interest on lease liabilities in the consolidated income statement, whereas under IAS 17 operating leases previously gave rise to a straight-line expense in the income statement.

Under IFRS 16 the Group separates the total amount of cash paid for leases that are on balance sheet into the principal portion (presented within financing activities) and interest in the consolidated cash flow statement. Under IAS 17 operating lease payments were presented as operating cash outflows. Under both IFRS 16 and IAS 17 there is no difference to net cashflow.

Former finance leases

The main differences between IFRS 16 and IAS 17 with respect to assets formerly held under a finance lease is the measurement of the residual value guarantees provided by the lessee to the lessor. IFRS 16 requires that the Group recognises as part of its lease liability only the amount expected to be payable under a residual value guarantee, rather than the maximum amount guaranteed as required by IAS 17. This change does not have an effect on the Groups consolidated financial statements. Former finance leases are presented together with new leases taken on balance sheet as part of the transition to IFRS 16.

The impact of adopting IFRS 16 is summarised in Note 20 which details the Group's condensed consolidation income statement, condensed consolidated balance sheet and condensed consolidated interim statement of cash flows.

Finance leases and operating leases for the comparative periods ended 30 June 2018 and the year ended 31 December 2018 were recognised and measured in accordance with IAS 17 Leases. The accounting policies set out below are those applied to the current period, in accordance with IFRS 16.

Accounting policy for leases

When a contractual arrangement contains a lease, the Group recognises a lease liability and a corresponding right of use asset at the commencement of the lease.

At the commencement date the lease liability is measured at the present value of the future lease payments, discounted using the Group's incremental borrowing rate where the interest rate in the lease is not readily determined.

Lease payments included in the measurement of the lease liability include:

   --      Fixed lease payments (including in substance fixed payments), less any lease incentives; 

-- Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

   --      The amount expected to be payable by the lessee under residual value guarantees; 

-- The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

-- Payment of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease

In general, where extension options exist, the Group recognises these as part of the lease liability as invariably these are exercised.

The lease liability is presented as a separate line in the consolidated statement of financial position

Subsequently, the lease liability is adjusted by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right of use asset) whenever:

-- The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using the discount rate appropriate at that point in time

-- The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in the floating interest rate, in which case a revised discount rate is used)

-- A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using the revised discount rate.

The right of use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs.

In addition, on transition, the right of use asset is adjusted for:

   --      The value of any lease incentives on the balance sheet at 31 December 2018 
   --      The value of any onerous lease provisions on the balance at 31 December 2018 

The right of use asset is subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms of the lease, a provision is recognised and measured under IAS 37 and included in the related right of use asset.

Right of use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Group does not have any leases that include purchase or transfer options of the underlying asset.

The right of use assets are presented as a separate line item on the condensed consolidated statement of financial position, however the categories used in the Note 7 to the consolidated financial statements are the same as those used for owned tangible assets - namely Land & buildings and Fixtures and Equipment.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right of use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occur and are generally included within cost of sales in the consolidated income statement.

Subleasing

The Group has several contracts in place to rent space or assets to third parties, predominately across its FBO portfolio.

The Group assesses these contracts to determine firstly whether they constitute leases under IFRS 16, and secondly, where they do, to assess whether these should be accounted for as finance leases.

Where such contracts constitute leases, the assessment considers both the term of the master lease against any subcontract; and the present value of the master lease liability against the present value of the subcontract rental income stream.

Where finance subleases exist the associated right of use asset is derecognised and instead a receivable recognised from the lessee (also referred to as "net investment in the sublease"). The lease liability pertaining to the master lease remains unaffected.

Assets and associated liabilities classified as held for sale

Assets classified as held for sale are measured at the lower of carrying amount or fair value less costs to sell. Assets are classified as held for sale if their net carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year of the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

2. Segmental analysis

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Group Chief Executive to allocate resources to the segments and to assess their performance.

The Group provides information to the Chief Executive on the basis of components that are substantially similar within the segments in the following aspects:

-- the nature of the long-term financial performance;

-- the nature of the products and services;

-- the nature of the production processes;

-- the type of class of customer for the products and services; and

-- the nature of the regulatory environment.

Based on the above, the operating segments of the Group identified in accordance with IFRS 8 are Signature (formerly known as Flight Support), which comprises Signature Flight Support and EPIC Fuels, and Ontic (formerly known as Aftermarket Services). The Ontic segment results show the effect of the ERO discontinued operations being removed.

The businesses within the Signature segment provide refuelling, ground handling, line maintenance and other services to the Business & General Aviation (B&GA) and commercial aviation markets. The Ontic segment maintains and supports aerospace components, sub-systems and systems.

Sales between segments are immaterial.

Alternative Performance Measures are reconciled to IFRS measures and explained in Note 19, the Alternative Performance Measures section.

 
 As at, and for the six months ended                                              Unallocated 
  30 June 2019                              Signature(1)   Ontic(5)     Total    Corporate(2)     Total 
 Business segments                                    $m         $m        $m              $m        $m 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 External revenue 
 External revenue from continuing 
  and discontinued operations                    1,140.4      387.7   1,528.1               -   1,528.1 
 Less external revenue from ERO 
  discontinued operations, note 16                     -    (265.4)   (265.4)               -   (265.4) 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 External revenue from continuing 
  operations                                     1,140.4      122.3   1,262.7               -   1,262.7 
 
 Underlying operating profit 
 Underlying operating profit/(loss) 
  from continuing and discontinued 
  operations                                       180.3       51.2     231.5          (14.8)     216.7 
 Less underlying operating profit 
  from ERO discontinued operations                     -     (24.9)    (24.9)               -    (24.9) 
 Adjusted for intergroup charges 
  for ERO discontinued operations(3)                   -        5.4       5.4           (5.4)         - 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 Underlying operating profit/(loss) 
  from continuing operations                       180.3       31.7     212.0          (20.2)     191.8 
 Underlying operating margin from 
  continuing operations                            15.8%      25.9%     16.8%               -     15.2% 
 
 Exceptional and other items 
 Exceptional and other items from 
  continuing and discontinued operations          (37.6)     (10.7)    (48.3)          (12.4)    (60.7) 
 Less exceptional and other items                      -          -         -               -         - 
  from ERO discontinued operations 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 Exceptional and other items from 
  continuing operations                           (37.6)     (10.7)    (48.3)          (12.4)    (60.7) 
 Operating profit/(loss) from continuing 
  operations                                       142.7       21.0     163.7          (32.6)     131.1 
 
 Impairment of fixed assets                                                                           - 
 Net finance costs                                                                               (73.6) 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 Profit before tax from continuing 
  operations                                                                                       57.5 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 
 Other information 
 Capital additions(4)                               32.9        8.4      41.3             0.8      42.1 
 Less capital additions from ERO 
  discontinued operations                              -      (6.3)     (6.3)               -     (6.3) 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 Capital additions from continuing 
  operations                                        32.9        2.1      35.0             0.8      35.8 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 Depreciation and amortisation                     116.2       15.2     131.4             0.5     131.9 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 Depreciation and amortisation from 
  continuing operations                            116.2       15.2     131.4             0.5     131.9 
-----------------------------------------  -------------  ---------  --------  --------------  -------- 
 
 
 As at, and for the six months ended                                                 Unallocated 
  30 June 2019                               Signature(1)   Ontic(5)       Total    Corporate(2)       Total 
 Business segments                                     $m         $m          $m              $m          $m 
------------------------------------------  -------------  ---------  ----------  --------------  ---------- 
 Balance sheet 
 Total assets                                     4,225.9    1,048.7     5,274.6            92.7     5,367.3 
 Total liabilities                              (1,441.6)    (267.0)   (1,708.6)       (1,793.0)   (3,501.6) 
------------------------------------------  -------------  ---------  ----------  --------------  ---------- 
 Net assets/(liabilities)                         2,784.3      781.7     3,566.0       (1,700.3)     1,865.7 
 Less net (assets)/liabilities from 
  ERO discontinued operations                           -    (242.8)     (242.8)               -     (242.8) 
------------------------------------------  -------------  ---------  ----------  --------------  ---------- 
 Net assets/(liabilities) from continuing 
  operations                                      2,784.3      538.9     3,323.2       (1,700.3)     1,622.9 
------------------------------------------  -------------  ---------  ----------  --------------  ---------- 
 
 
 As at, and for the six months ended                                               Unallocated 
  30 June 2018                               Signature(1)   Ontic(5)     Total    Corporate(2)       Total 
 Business segments                                     $m         $m        $m              $m          $m 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 30 June 2018 restated 
 External revenue 
 External revenue from continuing 
  and discontinued operations                       926.3      355.6   1,281.9               -     1,281.9 
 Less external revenue from ERO 
  discontinued operations                               -    (257.6)   (257.6)               -     (257.6) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 External revenue from continuing 
  operations                                        926.3       98.0   1,024.3               -     1,024.3 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 
 Underlying operating profit 
 Underlying operating profit/(loss) 
  from continuing and discontinued 
  operations                                        163.7       31.6     195.3          (14.8)       180.5 
 Less underlying operating profit 
  from ERO discontinued operations                      -     (13.4)    (13.4)               -      (13.4) 
 Adjusted for intergroup charges 
  for ERO discontinued operations(3)                    -        5.7       5.7           (5.7)           - 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Underlying operating profit/(loss) 
  from continuing operations                        163.7       23.9     187.6          (20.5)       167.1 
 Underlying operating margin from 
  continuing operations                             17.7%      24.4%     18.3%               -       16.3% 
 
 Exceptional and other items 
 Exceptional and other items from 
  continuing and discontinued operations           (37.7)     (13.8)    (51.5)           (0.8)      (52.3) 
 Less exceptional and other items 
  from ERO discontinued operations                      -        1.1       1.1               -         1.1 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Exceptional and other items from 
  continuing operations                            (37.7)     (12.7)    (50.4)           (0.8)      (51.2) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Operating profit/(loss) from continuing 
  operations                                        126.0       11.2     137.2          (21.3)       115.9 
 
 Impairment of fixed assets                                                                         (12.8) 
 Net finance costs                                                                                  (26.9) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Profit before tax from continuing 
  operations                                                                                          76.2 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 
 Other information 
 Capital additions(4)                                29.7       14.6      44.3               -        44.3 
 Less capital additions from ERO 
  discontinued operations                               -     (13.0)    (13.0)               -      (13.0) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Capital additions from continuing 
  operations                                         29.7        1.6      31.3               -        31.3 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Depreciation and amortisation                       70.1       14.7      84.8             0.2        85.0 
 Less depreciation and amortisation 
  from ERO discontinued operations                      -      (3.7)     (3.7)               -       (3.7) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Depreciation and amortisation from 
  continuing operations                              70.1       11.0      81.1             0.2        81.3 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 
 Balance Sheet 
 Total assets                                     3,156.0      834.8   3,990.8            67.9     4,058.7 
 Total liabilities                                (339.7)    (176.1)   (515.8)       (1,647.7)   (2,163.5) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Net assets/(liabilities)                         2,816.3      658.7   3,475.0       (1,579.8)     1,895.2 
 Less net (assets)/liabilities from 
  ERO discontinued operations                           -    (259.5)   (259.5)               -     (259.5) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Net assets/(liabilities) from continuing 
  operations                                      2,816.3      399.2   3,215.5       (1,579.8)     1,635.7 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 

2.

 
 As at, and for the year ended 31                                                  Unallocated 
  December 2018                              Signature(1)   Ontic(5)     Total    Corporate(2)       Total 
 Business segments                                     $m         $m        $m              $m          $m 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 External revenue 
 External revenue from continuing 
  and discontinued operations                     2,127.6      753.3   2,880.9               -     2,880.9 
 Less external revenue from ERO 
  discontinued operations                               -    (533.6)   (533.6)               -     (533.6) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 External revenue from continuing 
  operations                                      2,127.6      219.7   2,347.3               -     2,347.3 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 
 Underlying operating profit 
 Underlying operating profit/(loss) 
  from continuing and discontinued 
  operations                                        320.6       82.9     403.5          (28.3)       375.2 
 Less underlying operating profit 
  from ERO discontinued operations                      -     (35.0)    (35.0)               -      (35.0) 
 Adjusted for intergroup charges 
  for ERO discontinued operations(3)                    -       10.7      10.7          (10.7)           - 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Underlying operating profit/(loss) 
  from continuing operations                        320.6       58.6     379.2          (39.0)       340.2 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Underlying operating margin from 
  continuing operations                             15.1%      26.7%     16.2%               -       14.5% 
 
 Exceptional and other items 
 Exceptional and other items from 
  continuing and discontinued operations           (76.0)     (21.7)    (97.7)          (16.0)     (113.7) 
 Less exceptional and other items 
  from ERO discontinued operations                      -        1.1       1.1               -         1.1 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Exceptional and other items from 
  continuing operations                            (76.0)     (20.6)    (96.6)          (16.0)     (112.6) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Operating profit/(loss) from continuing 
  operations                                        244.6       38.0     282.6          (55.0)       227.6 
 
 Impairment of fixed assets                                                                         (14.1) 
 Net finance costs                                                                                  (66.3) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Profit before tax from continuing 
  operations                                                                                         147.2 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 
 Other information 
 Capital additions(4)                                66.1       22.5      88.6             4.5        93.1 
 Less capital additions from ERO 
  discontinued operations                               -     (18.2)    (18.2)               -      (18.2) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Capital additions from continuing 
  operations                                         66.1        4.3      70.4             4.5        74.9 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Depreciation and amortisation                      143.0       26.6     169.6             0.4       170.0 
 Less depreciation and amortisation 
  from ERO discontinued operations                      -      (3.7)     (3.7)               -       (3.7) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Depreciation and amortisation from 
  continuing operations                             143.0       22.9     165.9             0.4       166.3 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Balance sheet 
 Total assets                                     3,198.8      984.2   4,183.0            88.2     4,271.2 
 Total liabilities                                (354.5)    (221.8)   (576.3)       (1,750.7)   (2,327.0) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Net assets/(liabilities)                         2,844.3      762.4   3,606.7       (1,662.5)     1,944.2 
 Less net (assets)/liabilities from 
  ERO discontinued operations                           -    (260.8)   (260.8)               -     (260.8) 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 Net assets/(liabilities) from continuing 
  operations                                      2,844.3      501.6   3,345.9       (1,662.5)     1,683.4 
------------------------------------------  -------------  ---------  --------  --------------  ---------- 
 
 

(1) Operating profit/(loss) from continuing operations includes $1.6 million (30 June 2018: $1.7 million; 31 December 2018: $4.0 million) relating to profits of associates and joint ventures.

(2) Unallocated corporate balances include debt, tax, provisions, pensions, insurance captives and trading balances from central activities.

(3) Costs previously allocated to ERO which has been classified as discontinued operations.

(4) Capital additions represent cash expenditures in the year. Capital additions include additions to property, plant and equipment, and intangible assets including Ontic licences not accounted for as acquisitions under IFRS 3.

(5) The 2018 Ontic results include the former ERO (Middle East) business which is not part of the ERO discontinued operations. The business did not trade in 2019. (30 June 2018: revenue of $2.6 million, operating loss of $0.6 million and statutory loss of $6.6 million; 31 December 2018: revenue of $3.7 million, operating loss of $0.7 million and statutory loss of $5.5 million).

 
 
                                             Revenue      Revenue         Capital   Non-current 
   Geographical segments              by destination    by origin    additions(1)     assets(2) 
                                                  $m           $m              $m            $m 
----------------------------------  ----------------  -----------  --------------  ------------ 
 As at, and for the six months ended 30 June 2019 
 United Kingdom                                 46.9        143.8             2.4         334.3 
 Mainland Europe                               104.3         27.6             0.7          89.5 
 North America                               1,314.0      1,346.9            39.0       3,971.4 
 Rest of world                                  62.9          9.8             0.0           2.2 
----------------------------------  ----------------  -----------  --------------  ------------ 
 Total from continuing and 
  discontinued operations                    1,528.1      1,528.1            42.1       4,397.4 
 Less discontinued ERO operations            (265.4)      (265.4)           (6.3)             - 
----------------------------------  ----------------  -----------  --------------  ------------ 
 Total from continuing operations            1,262.7      1,262.7            35.8       4,397.4 
----------------------------------  ----------------  -----------  --------------  ------------ 
 
 As at, and for the six months ended 30 June 2018 
 United Kingdom                                 34.5        131.1             4.0         281.6 
 Mainland Europe                               115.0         31.7             0.3          68.4 
 North America                               1,086.6      1,106.1            39.9       2,855.7 
 Rest of world                                  45.8         13.0             0.1           4.5 
----------------------------------  ----------------  -----------  --------------  ------------ 
 Total from continuing and 
  discontinued operations                    1,281.9      1,281.9            44.3       3,210.2 
 Less ERO discontinued operations            (257.6)      (257.6)          (13.0)             - 
----------------------------------  ----------------  -----------  --------------  ------------ 
 Total from continuing operations            1,024.3      1,024.3            31.3       3,210.2 
----------------------------------  ----------------  -----------  --------------  ------------ 
 
 Restated as at, and for the year ended 
  31 December 2018 
 United Kingdom                                 62.7        288.6             3.8         269.7 
 Mainland Europe                               237.8         64.7             0.5          60.8 
 North America                               2,465.4      2,500.8            88.4       3,027.9 
 Rest of world                                 115.0         26.8             0.4           1.8 
----------------------------------  ----------------  -----------  --------------  ------------ 
 Total from continuing and 
  discontinued operations                    2,880.9      2,880.9            93.1       3,360.2 
 Less ERO discontinued operations            (533.6)      (533.6)          (18.2)             - 
----------------------------------  ----------------  -----------  --------------  ------------ 
 Total from continuing operations            2,347.3      2,347.3            74.9       3,360.2 
----------------------------------  ----------------  -----------  --------------  ------------ 
 

(1) Capital additions represent cash expenditures in the year. Capital additions include additions to property, plant and equipment, and intangible assets including Ontic licenses not accounted for as acquisitions under IFRS 3.

(2) The disclosure of non-current assets by geographical segment excludes deferred tax $nil (30 June 2018: $nil; 31 December 2018: $nil) and financial instruments balances of $26.7 million (30 June 2018: $12.7 million; 31 December 2018: $12.5 million), as required under IFRS 8.

3. Exceptional and other items

Underlying profit is shown before exceptional and other items on the face of the Income Statement. Exceptional items are items which are material or non-recurring in nature, and include costs relating to acquisitions which are material to the associated business segment, costs related to strategic disposals (including those previously completed) and significant restructuring programmes some of which span multiple years. This is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee, and assists in providing a meaningful analysis of the trading results of the Group.

Other items includes amortisation of acquired intangibles accounted for under IFRS 3. The directors consider that this gives a useful indication of underlying performance and better visibility of Key Performance Indicators. Exclusion of amortisation of acquired intangibles accounted for under IFRS 3 from the Group's underlying results assists with the comparability of the Group's underlying profitability with peer companies.

Alternative Performance Measures are reconciled to IFRS measures and explained in Note 19, Alternative Performance Measures section.

Exceptional and other items on discontinued operations are presented in note 16. Exceptional and other items on continuing operations are as follows:

 
                                                                                Six months   Six months 
                                                                                     ended        ended 
                                                                                        30           30     Year ended 
                                                        Other                         June         June    31 December 
                                  Administrative    operating   Restructuring         2019         2018           2018 
                                        expenses     expenses           costs        Total        Total          Total 
                                              $m           $m              $m           $m           $m             $m 
-------------------------------  ---------------  -----------  --------------  -----------  -----------  ------------- 
 Restructuring expenses 
 ERO Middle East impairment 
  loss                                         -            -               -            -          6.1            4.9 
 Central costs rationalisation                 -            -             1.4          1.4          1.6            4.0 
-------------------------------  ---------------  -----------  --------------  -----------  -----------  ------------- 
 Other 
 Pension GMP equalisation                      -            -               -            -            -           11.1 
 Amounts related to 
  previously disposed 
  businesses                                   -         10.4               -         10.4            -            2.3 
 Other exceptional 
  items                                        -          1.0               -          1.0            -            0.1 
 Acquisition related 
 Amortisation of intangibles 
  assets arising on 
  acquisition and valued 
  in accordance with 
  IFRS 3                                    47.9            -               -         47.9         43.5           88.8 
 Transaction costs(1)                          -            -               -            -            -            1.4 
-------------------------------  ---------------  -----------  --------------  -----------  -----------  ------------- 
 Operating loss on 
  continuing operations                     47.9         11.4             1.4         60.7         51.2          112.6 
 Impairment loss                                                                         -         12.8           14.1 
-------------------------------  ---------------  -----------  --------------  -----------  -----------  ------------- 
 Loss before tax on continuing 
  operations                                                                          60.7         64.0          126.7 
------------------------------------------------  -----------  --------------  -----------  -----------  ------------- 
 Tax impact of exceptional 
  and other items                                                                   (14.7)       (14.7)         (29.1) 
------------------------------------------------  -----------  --------------  -----------  -----------  ------------- 
 Loss for the period on continuing 
  operations                                                                          46.0         49.3           97.6 
------------------------------------------------  -----------  --------------  -----------  -----------  ------------- 
 Loss from ERO discontinued operation, net 
  of tax, see note 16                                                                 32.5          5.0            5.0 
-----------------------------------------------------------------------------  -----------  -----------  ------------- 
 Total exceptional and other items                                                    78.5         54.3          102.6 
-----------------------------------------------------------------------------  -----------  -----------  ------------- 
 

1 All transaction costs presented as exceptional and other items in the prior period related to Ontic's acquisition of Firstmark.

4. Income tax

 
                                            Six months   Six months 
                                                 ended        ended     Year ended 
                                               30 June      30 June    31 December 
                                                  2019         2018           2018 
 Recognised in the Income statement                 $m           $m             $m 
-----------------------------------------  -----------  -----------  ------------- 
 Current tax expense                              18.6         17.1           41.5 
 Adjustments in respect of prior periods 
  - current tax                                      -            -          (4.6) 
-----------------------------------------  -----------  -----------  ------------- 
 Current tax                                      18.6         17.1           36.9 
-----------------------------------------  -----------  -----------  ------------- 
 Deferred tax (credit)/expense(1)                (3.0)        (2.3)            2.8 
 Adjustments in respect of prior periods 
  - deferred tax                                   0.3            -          (3.3) 
-----------------------------------------  -----------  -----------  ------------- 
 Deferred tax                                    (2.7)        (2.3)          (0.5) 
-----------------------------------------  -----------  -----------  ------------- 
 Income tax expense for the period from 
  continuing and discontinued operations          15.9         16.3           36.4 
 Less: ERO discontinued operations               (5.2)        (1.5)          (7.9) 
-----------------------------------------  -----------  -----------  ------------- 
 Income tax expense for the period from 
  continuing operations                           10.7         14.8           28.5 
-----------------------------------------  -----------  -----------  ------------- 
 

(1) The deferred tax credit includes $1.8 million relating to IFRS 16 lease liabilities.

Corporation tax on continuing operations for the interim period is charged at an effective rate of 21.5% (30 June 2018: 21.0%; 31 December 2018: 21.0%) on underlying profit before tax, representing the best estimate of the weighted average annual corporation tax expected for the full financial year. The total income tax expense for the six months ended 30 June 2019 includes a tax credit of $14.7 million (30 June 2018: $14.7 million; 31 December 2018: $29.1 million) relating to exceptional and other items (see note 3).

Tax credited to other comprehensive income and equity is as follows:

 
                                                 Six months   Six months 
                                                      ended        ended     Year ended 
                                                    30 June      30 June    31 December 
                                                       2019         2018           2018 
 Recognised in other comprehensive income                $m           $m             $m 
----------------------------------------------  -----------  -----------  ------------- 
 Tax on items that will not be reclassified subsequently 
  to profit or loss 
 Current tax other                                        -            -            0.7 
 Deferred tax credit/(charge) on actuarial 
  (losses)/gains                                        0.9        (5.4)          (9.7) 
----------------------------------------------  -----------  -----------  ------------- 
                                                        0.9        (5.4)          (9.0) 
----------------------------------------------  -----------  -----------  ------------- 
 
 Tax on items that may be reclassified subsequently 
  to profit or loss 
 Current tax credit on foreign exchange 
  movements                                               -            -            0.8 
 Deferred tax credit on derivative financial 
  instruments                                           0.6          0.4            0.9 
----------------------------------------------  -----------  -----------  ------------- 
                                                        0.6          0.4            1.7 
----------------------------------------------  -----------  -----------  ------------- 
 
 Total tax charge within other comprehensive 
  income                                                1.5        (5.0)          (7.3) 
----------------------------------------------  -----------  -----------  ------------- 
 
 Recognised in equity 
----------------------------------------------  -----------  -----------  ------------- 
 Current tax credit on share-based payments 
  movement                                              0.1          0.1            0.8 
 Deferred tax charge on share-based payments 
  movement                                                -            -          (0.3) 
----------------------------------------------  -----------  -----------  ------------- 
 Total tax credit within equity                         0.1          0.1            0.5 
----------------------------------------------  -----------  -----------  ------------- 
 
 Total tax charge within other comprehensive 
  income and equity                                     1.6        (4.9)          (6.8) 
----------------------------------------------  -----------  -----------  ------------- 
 

EU State Aid

The Group continues to monitor developments in relation to the EU State Aid investigation including the European Commission's decision in April that concluded the UK's Controlled Foreign Company regime partially represents State Aid and the UK authorities' subsequent appeal of this decision. In common with many other UK based multinational Groups whose arrangements were in line with UK CFC legislation, the Group may be affected by this decision. We have calculated our maximum potential liability to be approximately $113.0 million. We do not consider that any provision is required based on our current assessment of the issue.

5. Dividends

 
                                                   Six months   Six months     Year ended 
                                                        ended        ended    31 December 
                                                      30 June      30 June           2018 
                                                         2019         2018 
                                                           $m           $m             $m 
------------------------------------------------  -----------  -----------  ------------- 
 Paid during the period: 
 Final dividend for the year ended 31 December 
  2018: 10.07 cents per share (30 June 2018: 
  Final dividend for the year ended 31 December 
  2017 of 9.59 cents per share; 31 December 
  2018: Final dividend for the year ended 
  31 December 2017 of 9.59 cents per share 
  and 2018 interim dividend of 4.00 cents 
  per share)                                            103.9         99.3          140.7 
------------------------------------------------  -----------  -----------  ------------- 
 

The 2019 interim dividend of 4.20 cents per share (2018: 4.00 cents per share; total dividend $41.4 million) was approved by the Board of Directors on 2 August 2019 and will be paid on 1 November 2019 to ordinary shareholders registered on 13 September 2019. Shareholders will receive their dividends in sterling unless they complete and submit to the Company's registrars by 5.30pm on 7 October 2019 an election form stating their wish to receive their dividends in US dollars. The sterling dividend will be converted at a prevailing exchange rate on 8 October 2019 and this exchange rate will be announced on 9 October 2019.

6. Earnings per share

Alternative Performance Measures are reconciled to IFRS measures and explained in Note 19, the Alternative Performance Measures section. The calculation of the basic and diluted earnings per share is based on the following data:

 
                                              Continuing                                 Total 
                               ---------------------------------------  --------------------------------------- 
                                Six months   Six months                  Six months   Six months 
                                     ended        ended     Year ended        ended        ended     Year ended 
                                   30 June      30 June    31 December      30 June      30 June    31 December 
                                      2019         2018           2018         2019         2018           2018 
                                        $m           $m             $m           $m           $m             $m 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Basic and diluted 
 Earnings: 
 Profit for the period                46.8         61.4          118.7         31.4         66.7          137.9 
 Non-controlling interests           (0.2)            -          (0.3)        (0.2)            -          (0.3) 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Basic earnings attributable 
  to ordinary shareholders            46.6         61.4          118.4         31.2         66.7          137.6 
 Exceptional and other 
  items (net of tax)                  46.0         49.3           97.6         78.5         54.3          102.6 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Adjusted earnings for 
  adjusted earnings per 
  share                               92.6        110.7          216.0        109.7        121.0          240.2 
 Impact of adopting 
  IFRS 16 (note 20)                   10.2            -              -          7.1            -              - 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Adjusted earnings for 
  adjusted pre IFRS 16 
  earnings per share                 102.8        110.7          216.0        116.8        121.0          240.2 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Underlying deferred 
  tax(1)                              12.1         11.8           20.7         12.7         12.5           26.1 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Adjusted earnings for 
  cash earnings per share(1)         114.9        122.5          236.7        129.5        133.5          266.3 
-----------------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 
 
 Number of shares 
 Weighted average number of 29 (16) /(21) p 
  ordinary shares: 
 For basic earnings per 
  share                                1,031.2   1,029.9   1,030.1   1,031.2   1,029.9   1,030.1 
-----------------------------------  ---------  --------  --------  --------  --------  -------- 
 Dilutive potential ordinary 
  shares from share options                8.2      10.4       8.9       8.2      10.4       8.9 
-----------------------------------  ---------  --------  --------  --------  --------  -------- 
 For diluted earnings 
  per share                            1,039.4   1,040.3   1,039.0   1,039.4   1,040.3   1,039.0 
-----------------------------------  ---------  --------  --------  --------  --------  -------- 
 For diluted losses per 
  share                                1,031.2   1,029.9   1,030.1   1,031.2   1,029.9   1,030.1 
-----------------------------------  ---------  --------  --------  --------  --------  -------- 
 
 Basic: 
   Adjusted pre IFRS 16                  10.0c     10.7c     21.0c     11.3c     11.7c     23.3c 
   Adjusted                               9.0c                         10.7c 
   Unadjusted pre IFRS 
    16                                    5.5c      6.0c     11.5c      3.7c      6.5c     13.4c 
   Unadjusted                             4.5c                          3.0c 
   Cash pre IFRS 16(1)                   11.1c     11.9c     23.0c     12.6c     13.0c     25.9c 
 
 Diluted: 
   Adjusted pre IFRS 16                   9.9c     10.6c     20.8c     11.2c     11.6c     23.1c 
   Adjusted                               8.9c                         10.5c 
   Unadjusted pre IFRS 
    16                                    5.5c      5.9c     11.4c      3.7c      6.4c     13.2c 
   Unadjusted                             4.5c                          3.0c 
   Cash pre IFRS 16(1)                   11.0c     11.8c     22.8c     12.5c     12.8c     25.6c 
 
 

(1) As disclosed in the 2018 Annual Report, the Remuneration Committee decided to simplify the earnings per share measure used for the LTIP and use underlying earnings per share. For more information refer to the "Implementation of policy in 2019" on page 82 of the 2018 Annual Report.

Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease earnings per share or increase the loss per share.

Cash earnings per share is presented pre IFRS 16, calculated on earnings before exceptional and other items (note 3) and using current tax charge, not the total tax charge for the period, thereby excluding the deferred tax charge.

Adjusted earnings per share is presented calculated on earnings before exceptional and other items (note 3), and adjusted pre-IFRS 16, this is consistent with the performance measures relation to the LTIP awards. Both adjustments have been made because the directors consider that this gives a useful indication of underlying performance.

Earnings per share on discontinued operations is presented in note 16.

7. Right of use assets

Information presented in this note is in respect of the financial period ended 30 June 2019 in accordance with IFRS 16.

BBA Aviation holds property and equipment under leasing arrangement that are recognised as right of use assets and lease liabilities, with remaining lease terms ranging up to 89 years in duration. The majority of the lease liability relates to long term leases on BBA's FBO network.

Information in respect of maturity analysis of lease liabilities, are set out in note 9 of the interim financial report. The amounts recognised for right of use assets, including the carrying amount, additions and depreciation for continuing operations is set out below:

 
                                         Land and         Fixtures     Total 
                                        buildings    and equipment 
                                               $m               $m        $m 
 Cost or valuation 
 Recognised on adoption of IFRS 16        1,048.6             39.6   1,088.2 
 Exchange adjustments                         0.2                -       0.2 
 Additions and renewals                      17.4              3.5      20.9 
------------------------------------  -----------  ---------------  -------- 
 At 30 June 2019                          1,066.2             43.1   1,109.3 
------------------------------------  -----------  ---------------  -------- 
 
 Depreciation 
 Depreciation charge for the period          37.5              6.7      44.2 
------------------------------------  -----------  ---------------  -------- 
 At 30 June 2019                             37.5              6.7      44.2 
------------------------------------  -----------  ---------------  -------- 
 
 Carrying amount 
 At 30 June 2019                          1,028.7             36.4   1,065.1 
------------------------------------  -----------  ---------------  -------- 
 Recognised on adoption of IFRS 16        1,048.6             39.6   1,088.2 
------------------------------------  -----------  ---------------  -------- 
 

The carrying value of right of use assets classified separately as assets held for sale is $71.2 million (see note 20), the right of use asset recognised on adoption of IFRS 16 and classified separately as held for sale was $61.8 million (see note 20).

On transition the right of use asset has been adjusted for the impact of lease incentives and onerous lease provisions recognised on the balance sheet as at 31 December 2018 ($24.9 million and $3.7 million respectively). The right of use asset has also been reduced by $20.0m for the impact of finance sublease receivables under IFRS 16, accordingly amounts receivable from subleases have been recognised within Trade and other receivables.

8. Cash and cash equivalents and borrowings

The carrying value of cash and cash equivalents for continuing operations of $116.7 million (30 June 2018: $147.6 million; 31 December 2018: $109.3 million) approximates to its fair value.

 
                                                      As at     As at         As at 
                                                    30 June   30 June   31 December 
                                                       2019      2018          2018 
Borrowings                                               $m        $m            $m 
-------------------------------------------------  --------  --------  ------------ 
Bank overdrafts                                           -       0.7           1.5 
Bank loans                                            592.8     473.7         565.3 
US private placement senior notes (USPP)              385.0     373.9         376.8 
US senior notes                                       508.1     489.8         494.2 
Other loans                                             0.3       0.3           0.3 
-------------------------------------------------  --------  --------  ------------ 
                                                    1,486.2   1,338.4       1,438.1 
-------------------------------------------------  --------  --------  ------------ 
The borrowings are repayable as follows: 
On demand or within one year                              -       0.7           1.5 
In the second year                                    568.6         -         448.2 
In the third to fifth years inclusive                 255.6     700.6         345.8 
After five years                                      662.0     637.1         642.6 
-------------------------------------------------  --------  --------  ------------ 
                                                    1,486.2   1,338.4       1,438.1 
Less: Amount due for settlement within 12 months 
 (shown within current liabilities)                       -     (0.7)         (1.5) 
-------------------------------------------------  --------  --------  ------------ 
Amount due for settlement after 12 months           1,486.2   1,337.7       1,436.6 
-------------------------------------------------  --------  --------  ------------ 
 

Bank loans, US private placement senior notes and US senior notes are stated after their respective transaction costs and related amortisation.

As at 30 June 2019

 
                       Facility                       Amortisation   Fair value 
  Type                   amount  Headroom  Principal         costs   adjustment    Drawn 
                                                                                          --------  -------- 
                             $m        $m         $m            $m           $m       $m  Facility  Maturity 
                                                                                              date      date 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Multicurrency 
 revolving bank 
 credit facility          650.0     501.0      149.0         (4.8)            -    144.2  Mar 2018  Mar 2024 
Acquisition facility 
 bank term loan 
 - Facility C             450.0         -      450.0         (1.4)            -    448.6  Sep 2015  Sep 2020 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total bank loans        1,100.0     501.0      599.0         (6.2)            -    592.8 
$300m USPP - Series 
 B                        120.0         -      120.0         (0.3)          0.3    120.0  May 2011  May 2021 
$300m USPP - Series 
 C                         60.0         -       60.0         (0.1)          1.0     60.9  May 2011  May 2023 
$200m USPP - Series 
 A                         50.0         -       50.0         (0.1)          0.6     50.5  Dec 2014  Dec 2021 
$200m USPP - Series 
 B                        100.0         -      100.0         (0.2)          2.4    102.2  Dec 2014  Dec 2024 
$200m USPP - Series 
 C                         50.0         -       50.0         (0.1)          1.5     51.4  Dec 2014  Dec 2026 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total USPP                380.0         -      380.0         (0.8)          5.8    385.0 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
$500m US senior 
 notes                    500.0         -      500.0         (9.2)         17.3    508.1  Apr 2018  May 2026 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total US senior 
 notes                    500.0         -      500.0         (9.2)         17.3    508.1 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total bank and 
 loans notes            1,980.0              1,479.0        (16.2)         23.1  1,485.9 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Bank overdraft - UK                                                                    - 
 cash pool 
Other loans                                                                          0.3 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
                                                                                 1,486.2 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
 

As at 30 June 2018

 
                       Facility                       Amortisation   Fair value 
  Type                   amount  Headroom  Principal         costs   adjustment    Drawn 
                                                                                          --------  -------- 
                             $m        $m         $m            $m           $m       $m  Facility  Maturity 
                                                                                              date      date 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Multicurrency 
 revolving bank 
 credit facility          650.0     618.0       32.0         (6.0)            -     26.0  Mar 2018  Mar 2023 
Acquisition facility 
 bank term loan 
 - Facility C             450.0         -      450.0         (2.3)            -    447.7  Sep 2015  Sep 2020 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total bank loans        1,100.0     618.0      482.0         (8.3)            -    473.7 
$300m USPP - Series 
 B                        120.0         -      120.0         (0.3)        (0.5)    119.2  May 2011  May 2021 
$300m USPP - Series 
 C                         60.0         -       60.0         (0.2)        (2.0)     57.8  May 2011  May 2023 
$200m USPP - Series 
 A                         50.0         -       50.0         (0.2)            -     49.8  Dec 2014  Dec 2021 
$200m USPP - Series 
 B                        100.0         -      100.0         (0.3)        (1.6)     98.1  Dec 2014  Dec 2024 
$200m USPP - Series 
 C                         50.0         -       50.0         (0.2)        (0.8)     49.0  Dec 2014  Dec 2026 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total USPP                380.0         -      380.0         (1.2)        (4.9)    373.9 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
$500m US senior 
 notes                    500.0         -      500.0        (10.5)          0.3    489.8  Apr 2018  May 2026 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total US senior 
 notes                    500.0         -      500.0        (10.5)          0.3    489.8 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total bank and 
 loans notes            1,980.0     618.0    1,362.0        (20.0)        (4.6)  1,337.4 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Bank overdraft - UK 
 cash pool                                                                           0.7 
Other loans                                                                          0.3 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
                                                                                 1,338.4 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
 

As at 31 December 2018

 
                       Facility                       Amortisation   Fair value 
  Type                   amount  Headroom  Principal         costs   adjustment    Drawn 
                                                                                          --------  -------- 
                             $m        $m         $m            $m           $m       $m  Facility  Maturity 
                                                                                              date      date 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Multicurrency 
 revolving bank 
 credit facility          650.0     528.0      122.0         (4.9)            -    117.1  Mar 2018  Mar 2023 
Acquisition facility 
 bank term loan 
 - Facility C             450.0         -      450.0         (1.8)            -    448.2  Sep 2015  Sep 2020 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total bank loans        1,100.0     528.0      572.0         (6.7)            -    565.3 
$300m USPP - Series 
 B                        120.0         -      120.0         (0.3)          0.2    119.9  May 2011  May 2021 
$300m USPP - Series 
 C                         60.0         -       60.0         (0.2)        (1.2)     58.6  May 2011  May 2023 
$200m USPP - Series 
 A                         50.0         -       50.0         (0.2)          0.1     49.9  Dec 2014  Dec 2021 
$200m USPP - Series 
 B                        100.0         -      100.0         (0.3)        (0.8)     98.9  Dec 2014  Dec 2024 
$200m USPP - Series 
 C                         50.0         -       50.0         (0.1)        (0.4)     49.5  Dec 2014  Dec 2026 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total USPP                380.0         -      380.0         (1.1)        (2.1)    376.8 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
$500m US senior 
 notes                    500.0         -      500.0         (9.8)          4.0    494.2  Apr 2018  May 2026 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total US senior 
 notes                    500.0         -      500.0         (9.8)          4.0    494.2 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Total bank and 
 loans notes            1,980.0     528.0    1,452.0        (17.6)          1.9  1,436.3 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
Bank overdraft - UK 
 cash pool                                                                           1.5 
Other loans                                                                          0.3 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
                                                                                 1,438.1 
---------------------  --------  --------  ---------  ------------  -----------  -------  --------  -------- 
 

During the first half, on the first anniversary of the $650 million multicurrency revolving credit facility (RCF) the lenders approved an extension to the facility for an additional year and the RCF is now due to expire in March 2024. The RCF includes an option to extend the maturity date for an additional year at the second anniversary. The extension option is at the lenders' option.

As at 30 June 2019, the Group had $149 million drawn under the RCF (30 June 2018: $32 million; 31 December 2018: $122 million). During the first half the Acquisition facility bank term loan - Facility C was novated to BBA U.S. Holdings Inc.

As at 30 June 2019, the Group had $380 million (30 June 2018: $380 million; 31 December 2018: $380 million) of US private placement senior notes outstanding with $280 million (30 June 2018: $280 million; 31 December 2018: $280 million) accounted for at fair value through profit and loss as the fair value interest rate risk has been hedged from fixed to floating rates. The remainder is accounted for at amortised cost.

As at 30 June 2019, the Group also had $500 million (30 June 2018: $500 million; 31 December 2018: $500 million) of US senior notes outstanding with $250 million accounted for at fair value through profit and loss as the fair value interest rate risk has been hedged from fixed to floating rates. The remainder is accounted for at amortised cost.

Under IFRS hedge accounting rules the fair value movement on the loan notes is booked to interest and is offset by the fair value movement on the underlying interest rate swaps. These notes were issued by BBA U.S. Holdings Inc.

The Group excludes the fair value movement on its loan notes from its definition of net debt (refer to Note 19, Alternative Performance Measures section), as this movement is offset by the change in fair value of the underlying interest rate swaps. The fair value loss on its US private placement senior notes at 30 June 2019 was $5.8 million (30 June 2018: $4.9 million gain; 31 December 2018: $2.1 million gain). The fair value loss on its US senior notes at 30 June 2019 was $17.3 million (30 June 2018: $0.3 million gain; 31 December 2018: $4.0 million loss).

All other borrowings are held at amortised cost.

9. Lease liabilities

Information presented in this note is in respect of the financial period ended 30 June 2019 in accordance with IFRS 16.

BBA Aviation holds property and equipment under leasing arrangements that are recognised as right of use assets and lease liabilities, with remaining lease terms ranging up to 89 years in duration. The majority of the lease liability relates to long term leases on BBA's FBO network.

Information in respect of the amounts recognised for right of use assets, including the carrying amount, additions and depreciation, are set out in note 7 of the interim financial report. A maturity analysis of lease liabilities for continuing operations is set out below:

 
                                                  As at      As at          As at 
                                                30 June    30 June    31 December 
                                                   2019    2018(1)        2018(1) 
                                                     $m         $m             $m 
--------------------------------------------  ---------  ---------  ------------- 
 Amounts payable under lease liabilities(2) 
--------------------------------------------  ---------  ---------  ------------- 
 Minimum lease payments 
 Within one year                                  128.0        0.4            1.5 
 In the second to fifth years inclusive           444.5        1.0            3.2 
 More than five years                           1,700.9        0.1            0.4 
--------------------------------------------  ---------  ---------  ------------- 
                                                2,273.4        1.5            5.1 
--------------------------------------------  ---------  ---------  ------------- 
 Present value of minimum lease payments 
 Within one year                                   57.9        0.2            1.1 
 In the second to fifth years inclusive           192.8        1.0            2.9 
 More than five years                             881.1        0.1            0.3 
--------------------------------------------  ---------  ---------  ------------- 
                                                1,131.8        1.3            4.3 
--------------------------------------------  ---------  ---------  ------------- 
 Lease liabilities recognised in the condensed 
  consolidated balance sheet 
 Current                                           57.9        0.2            1.1 
 Non-current                                    1,073.9        1.1            3.2 
--------------------------------------------  ---------  ---------  ------------- 
                                                1,131.8        1.3            4.3 
--------------------------------------------  ---------  ---------  ------------- 
 

(1) The amounts presented in the comparative periods represents finance leases recognised in accordance with IAS 17.

(2) Amounts payable under lease liabilities for discontinued operations are presented in note 16.

 
                                                 Six months   Six months 
                                                      Ended        Ended     Year Ended 
                                                    30 June      30 June    31 December 
                                                       2019      2018(2)        2018(2) 
                                                         $m           $m             $m 
----------------------------------------------  -----------  -----------  ------------- 
 Amounts recognised in the condensed consolidated income statement 
  for continuing operations 
 Interest on sublease assets                            0.9            -              - 
 Interest on lease liabilities                       (35.4)            -          (0.1) 
 Expenses relating to variable lease payments        (12.1)            -              - 
  not included in the measurement of lease 
  liabilities 
 Depreciation on right of use assets                 (44.2)            -              - 
----------------------------------------------  -----------  -----------  ------------- 
                                                     (90.8)            -          (0.1) 
----------------------------------------------  -----------  -----------  ------------- 
 Total amounts recognised in the condensed consolidated 
  cash flow statement(1) 
 Interest received on subleases assets                  0.9            -              - 
 Receipt of capital element of sublease                 1.3            -              - 
  assets 
 Interest element of lease liabilities 
  paid(2)                                            (37.2)            -          (0.1) 
 Payments of lease liabilities                       (36.1)            -          (0.4) 
----------------------------------------------  -----------  -----------  ------------- 
                                                     (71.1)            -          (0.5) 
----------------------------------------------  -----------  -----------  ------------- 
 

(1) Condensed consolidated cash flow statement includes the cash inflows/(outflows) for the continuing and discontinued operations.

(2) Interest element of lease liabilities paid includes $1.9 million on leases from ERO discontinued operation (30 June 2018: $nil; 31 December 2018: $nil).

(3) Payments of lease liabilities includes $5.8 million for leases classified with liabilities held for sale (30 June 2018: $nil; 31 December 2018: $nil) and $0.5 million on leases previously accounted for as finance leases under IAS 17 (30 June 2018: $nil; 31 December 2018: $0.4 million).

 
                                                                     Year Ended 
                                                                    31 December 
                                                                           2018 
                                                                             $m 
--------------------------------------------------------------    ------------- 
 
 Operating lease commitments as disclosed 
  at 31 December 2018                                                   2,679.9 
 Reconciling items: 
 
   *    Effect of discounting (at incremental borrowing rate 
        at 1 January 2019)                                            (1,254.3) 
 
   *    Adjustments for commitments outside the scope of IFRS 
        16                                                              (300.4) 
 
   *    Other adjustments to undiscounted future minimum 
        lease payments(1)                                                  74.8 
 
   *    Finance lease liabilities recognised at 31 December 
        2018 under IAS 17                                                   4.3 
----------------------------------------------------------------  ------------- 
 Lease liabilities at 1 January 2019                                    1,204.3 
----------------------------------------------------------------  ------------- 
 
 Continuing operations                                                  1,141.0 
 Discontinued operations                                                   63.3 
----------------------------------------------------------------  ------------- 
 Total from continuing and discontinued operations                      1,204.3 
----------------------------------------------------------------  ------------- 
 

(1) Adjustments include certain amendments to base data following completion the review of the lease portfolio and embedding variable CPI uplifts applied on the transition date (1 January 2019) into the opening lease liability.

10. Financial instruments

Categories of financial instruments

The carrying values of the financial instruments of the Group are analysed below:

 
                                                  30 June     30 June   31 December 
                                                     2019        2018          2018 
                                                 Carrying    Carrying      Carrying 
                                                    value       value         value 
                                                       $m          $m            $m 
---------------------------------------------  ----------  ----------  ------------ 
 Financial assets 
 Fair value through profit or loss - foreign 
  exchange contracts(1)                               0.3         1.1           0.2 
 Derivative instruments held in fair value 
  hedges(2)                                          22.1         0.3           4.1 
 Derivative instruments held in cash flow 
  hedges                                              2.1         8.3           6.0 
 Assets classified as financial instruments 
  fair valued through other comprehensive 
  income (FVTOCI)                                     3.2         5.1           3.7 
 Loans and receivables (including cash 
  and cash equivalents)(3,4)                        293.0       294.2         287.8 
---------------------------------------------  ----------  ----------  ------------ 
                                                    320.7       309.0         301.8 
---------------------------------------------  ----------  ----------  ------------ 
 Financial liabilities 
 Fair value through profit or loss - foreign 
  exchange contracts(1)                             (0.4)       (0.1)         (1.0) 
 Derivative instruments held in fair value 
  hedges(2)                                             -       (6.9)         (3.6) 
 Derivative instruments held in cash flow 
  hedges                                            (3.3)       (2.5)         (3.0) 
 Financial liabilities at amortised cost(4)     (1,213.5)   (1,097.7)     (1,193.0) 
 Financial liabilities at fair value              (547.9)     (519.4)       (526.2) 
---------------------------------------------  ----------  ----------  ------------ 
                                                (1,765.1)   (1,626.6)     (1,726.8) 
---------------------------------------------  ----------  ----------  ------------ 
 

(1) The foreign exchange contracts disclosed as fair value through profit or loss are not designated in a formal hedging relationship and are used to hedge foreign currency flows through the BBA Aviation plc company bank accounts to ensure that the Group is not exposed to foreign exchange risk through the management of its international cash management structure.

(2) Derivative instruments held in fair value hedges are designated in formal hedging relationships and are used to hedge the change in fair value of fixed rate US dollar borrowings.

(3) Recoveries from third parties in respect of environmental and other liabilities totalling $5.4 million (30 June 2018: $5.7 million; 31 December 2018: $5.7m) are included within trade and other receivables.

(4) The carrying value of trade and other receivables, and other payables approximates their fair value.

Derivative financial instruments

The fair values and notional amounts of derivative financial instruments are shown below. The fair value on initial recognition is the transaction price unless part of the consideration given or received is for something other than the instrument itself. The fair value of derivative financial instruments is subsequently calculated using discounted cash flow techniques or other appropriate pricing models. All valuation techniques take into account assumptions based upon available market data at the balance sheet date. The notional amounts are based on the contractual gross amounts at the balance sheet date.

The fair values of the assets classified as financial instruments within other comprehensive income and derivative financial instruments are categorised within Level 2 of the fair value hierarchy on the basis that their fair value has been calculated using inputs that are observable in active markets which are related to the individual asset or liability. The Group does not have any derivative financial instruments which would be categorised as either Level 1 or 3 of the fair value hierarchy.

 
 
                              30 June 2019           30 June 2018          31 December 2018 
                         Notional                Notional                Notional 
                           amount   Fair value     amount   Fair value     amount   Fair value 
 Derivative financial 
  assets                       $m           $m         $m           $m         $m           $m 
----------------------  ---------  -----------  ---------  -----------  ---------  ----------- 
 Derivatives not in a formal hedging relationship 
 Foreign exchange 
  forward contracts          85.9          0.3      114.1          1.1        3.3          0.2 
 Fair value hedges 
 Interest rate swaps      (530.0)         22.1    (250.0)          0.3    (250.0)          4.1 
 Cash flow hedges 
 Interest rate swaps      (284.9)          1.1    (291.0)          6.6    (284.9)          4.6 
 Foreign exchange 
  forward contracts          12.3          1.0     (18.4)          1.7       18.4          1.4 
----------------------  ---------  -----------  ---------  -----------  ---------  ----------- 
                          (716.7)         24.5    (445.3)          9.7    (513.2)         10.3 
----------------------  ---------  -----------  ---------  -----------  ---------  ----------- 
 
 
 
 
                              30 June 2019           30 June 2018          31 December 2018 
                         Notional                Notional                Notional 
                           amount   Fair value     amount   Fair value     amount   Fair value 
 Derivative financial 
  liabilities                  $m           $m         $m           $m         $m           $m 
----------------------  ---------  -----------  ---------  -----------  ---------  ----------- 
 Derivatives not in a formal hedging relationship 
 Foreign exchange 
  forward contracts         162.4        (0.4)       72.8        (0.1)      188.9        (1.0) 
 Fair value hedges 
 Interest rate swaps            -            -    (280.0)        (6.9)    (280.0)        (3.6) 
 Cash flow hedges 
 Interest rate swaps            -            -     (50.0)        (0.1)          -            - 
 Foreign exchange 
  forward contracts        (73.0)        (3.3)     (42.4)        (2.4)     (81.2)        (3.0) 
----------------------  ---------  -----------  ---------  -----------  ---------  ----------- 
                             89.4        (3.7)    (299.6)        (9.5)    (172.3)        (7.6) 
----------------------  ---------  -----------  ---------  -----------  ---------  ----------- 
 

Adjustments relating to the credit risk of BBA Aviation plc and its counterparties, as defined within IFRS 13, are immaterial in the current period and prior periods.

11. Net cash flow from operating activities

 
 
                                                   Six months     Six months      Year ended 
                                                        ended          ended     31 December 
                                                      30 June        30 June            2018 
                                                         2019           2018 
                                                           $m             $m              $m 
-----------------------------------------------  ------------  -------------  -------------- 
 
 Operating profit                                       131.1          115.9           227.6 
 Operating profit from discontinued operations 
  (note 16)                                              24.9           12.3            33.9 
 Less: Share of profit from associates 
  and joint ventures                                    (1.6)          (1.7)           (4.0) 
-----------------------------------------------  ------------  -------------  -------------- 
 Profit from operations                                 154.4          126.5           257.5 
 Depreciation of property, plant and equipment           34.4           35.3            69.0 
 Depreciation of right of use assets                     44.2              -               - 
 Amortisation of intangible assets                       53.3           49.7           101.0 
 (Profit)/loss on sale of property, plant 
  and equipment                                         (0.3)            0.6             3.4 
 Share-based payment expense                              4.8            5.7             8.2 
 Decrease in provisions                                 (0.7)          (2.8)          (12.4) 
 Pension scheme payments                                (2.3)          (2.2)           (5.9) 
 Other non-cash items                                    11.7          (1.1)             1.8 
 Unrealised foreign exchange movements                  (0.8)          (0.7)           (1.0) 
-----------------------------------------------  ------------  -------------  -------------- 
 Operating cash inflows before movements 
  in working capital                                    298.7          211.0           421.6 
 Increase in working capital                            (2.4)         (23.7)          (26.2) 
-----------------------------------------------  ------------  -------------  -------------- 
 Cash generated by operations                           296.3          187.3           395.4 
 Net income taxes paid                                 (23.0)         (10.2)          (27.1) 
-----------------------------------------------  ------------  -------------  -------------- 
 Net cash from operating activities                     273.3          177.1           368.3 
-----------------------------------------------  ------------  -------------  -------------- 
 
 Dividends received from associates and 
  joint ventures                                          2.9            1.7             2.0 
 Purchase of property, plant and equipment             (34.9)         (40.1)          (85.3) 
 Purchase of intangible assets(1)                       (6.2)          (3.0)           (6.6) 
 Proceeds from disposal of property, plant 
  and equipment                                           3.6            0.3             4.7 
 Interest received                                        0.3            0.3            12.7 
 Interest received on sublease assets                     0.9              -               - 
 Receipt of capital element of sublease                   1.3              -               - 
  assets 
 Interest paid                                         (38.7)         (21.8)          (70.9) 
 Interest element of lease liabilities 
  paid                                                 (37.2)              -           (0.1) 
 Payments of lease liabilities                         (36.1)              -               - 
-----------------------------------------------  ------------  -------------  -------------- 
 Free cash flow(2)                                      129.2          114.5           224.8 
-----------------------------------------------  ------------  -------------  -------------- 
 

(1) Purchase of intangible assets excludes $1.0 million (30 June 2018: $1.2 million; 31 December 2018 $1.2 million) paid in relation to Ontic licenses, not accounted for as acquisitions under IFRS 3 since the directors believe these payments are more akin to expenditure in relation to acquisitions, and are therefore outside the Group's definition of free cash flow. These amounts are included within purchase of intangible assets on the face of the Cash Flow Statement.

   2          There is no IFRS 16 impact on free cash flow as a result of adopting IFRS 16. 

12. Analysis of changes in net debt

As at 30 June 2019

 
                                                                                                           Transfer 
                                                                                                                 to 
                                                                                                          (assets)/ 
                          At 1   Adoption        Cash       Fair    Foreign                             liabilities        At 30 
                       January    of IFRS   (inflow)/      value   exchange  Amortisation    New lease         held         June 
                          2019         16  outflow(1)  movements  movements         costs  liabilities     for sale         2019 
                            $m         $m          $m         $m         $m            $m           $m           $m           $m 
-------------------  ---------  ---------  ----------  ---------  ---------  ------------  -----------  -----------  ----------- 
Bank loans             (565.3)          -      (26.3)          -          -         (1.2)            -            -    (592.8) 
USPP(2)                (376.8)          -           -      (7.9)          -         (0.3)            -            -    (385.0) 
US senior notes(3)     (494.2)          -           -     (13.3)          -         (0.6)            -            -    (508.1) 
Other loans              (0.3)          -           -          -          -             -            -            -      (0.3) 
Bank overdraft           (1.5)          -         1.5          -          -             -            -            -          - 
Lease liabilities 
 for covenants(4)        (4.3)          -         0.5          -          -             -            -            -      (3.8) 
-------------------  ---------  ---------  ----------  ---------  ---------  ------------  -----------  -----------  --------- 
Arising from 
 financing 
 activities          (1,442.4)          -      (24.3)     (21.2)          -         (2.1)            -            -  (1,490.0) 
Cash and cash 
 equivalents             109.3          -        24.0          -      (9.5)             -            -        (7.1)      116.7 
-------------------  ---------  ---------  ----------  ---------  ---------  ------------  -----------  -----------  --------- 
Net debt for 
 covenants 
 purposes(4)         (1,333.1)          -       (0.3)     (21.2)      (9.5)         (2.1)            -        (7.1)  (1,373.3) 
Lease liabilities            -  (1,136.7)        29.8          -        0.3             -       (21.4)            -  (1,128.0) 
-------------------  ---------  ---------  ----------  ---------  ---------  ------------  -----------  -----------  --------- 
Net debt per 
 balance 
 sheet including 
 Lease 
 liabilities(2,3,5)  (1,333.1)  (1,136.7)        29.5     (21.2)      (9.2)         (2.1)       (21.4)        (7.1)  (2,501.3) 
Less fair value 
 adjustments               1.9          -           -       21.2          -             -            -            -       23.1 
Net debt classified 
 as held for 
 sale(6)                 (1.0)     (63.3)         8.8          -      (0.4)             -       (10.3)          7.1     (59.1) 
-------------------  ---------  ---------  ----------  ---------  ---------  ------------  -----------  -----------  --------- 
Net debt per cash 
 flow (2,3,5)        (1,332.2)  (1,200.0)        38.3          -      (9.6)         (2.1)       (31.7)            -  (2,537.3) 
-------------------  ---------  ---------  ----------  ---------  ---------  ------------  -----------  -----------  --------- 
 
 

As at 30 June 2018

 
                                                                                                   Transfer 
                                                                                 Acquisition   to (assets)/ 
                        At 1         Cash        Fair     Foreign                       from    liabilities      At 30 
                     January    (inflow)/       value    exchange  Amortisation        third           held       June 
                        2018   outflow(1)   movements   movements         costs      parties       for sale       2018 
                          $m           $m          $m          $m            $m           $m             $m         $m 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Bank loans           (813.3)        342.3           -           -         (2.7)            -              -    (473.7) 
USPP(2)              (502.2)        120.0         8.4           -         (0.1)            -              -    (373.9) 
US senior 
 notes(3)                  -      (489.1)       (0.3)           -         (0.4)            -              -    (489.8) 
Other loans            (3.3)            -           -           -             -            -            3.0      (0.3) 
Bank overdraft         (4.0)          3.3           -           -             -            -              -      (0.7) 
Lease liabilities 
 for covenants 
 (4)                   (1.3)            -           -           -             -            -              -      (1.3) 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Arising from 
 financing 
 activities        (1,324.1)       (23.5)         8.1           -         (3.2)            -            3.0  (1,339.7) 
Cash and cash 
 equivalents           153.5          3.2           -       (6.7)             -            -          (2.4)      147.6 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Net debt per 
 balance 
 sheet             (1,170.6)       (20.3)         8.1       (6.7)         (3.2)            -            0.6  (1,192.1) 
Less fair value 
 adjustments             3.5            -       (8.1)           -             -            -              -      (4.6) 
Net debt 
 classified 
 as held for sale          -            -           -           -             -            -          (0.6)      (0.6) 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Net debt per cash 
 flow (2,3,5)      (1,167.1)       (20.3)           -       (6.7)         (3.2)            -              -  (1,197.3) 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
 

As at 31 December 2018

 
                                                                                                   Transfer 
                                                                                 Acquisition   to (assets)/ 
                        At 1         Cash        Fair     Foreign                       from    liabilities      At 31 
                     January    (inflow)/       value    exchange  Amortisation        third           held   December 
                        2018   outflow(1)   movements   movements         costs      parties       for sale       2018 
                          $m           $m          $m          $m            $m           $m             $m         $m 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Bank loans           (813.3)        252.0           -           -         (4.0)            -              -    (565.3) 
USPP(2)              (502.2)        120.0         5.6           -         (0.2)            -              -    (376.8) 
US senior 
 notes(3)                  -      (489.1)       (4.0)           -         (1.1)            -              -    (494.2) 
Other loans            (3.3)            -           -           -             -            -            3.0      (0.3) 
Bank overdraft         (4.0)          2.3           -         0.2             -            -              -      (1.5) 
Lease liabilities 
 for covenants(4)      (1.3)          0.4           -           -             -        (3.4)              -      (4.3) 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Arising from 
 financing 
 activities        (1,324.1)      (114.4)         1.6         0.2         (5.3)        (3.4)            3.0  (1.442.4) 
Cash and cash 
 equivalents           153.5       (35.4)           -      (13.2)             -          6.4          (2.0)      109.3 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Net debt per 
 balance 
 sheet             (1,170.6)      (149.8)         1.6      (13.0)         (5.3)          3.0            1.0  (1,333.1) 
Less fair value 
 adjustments             3.5            -       (1.6)           -             -            -              -        1.9 
Net debt 
 classified 
 as held for sale          -            -           -           -             -            -          (1.0)      (1.0) 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
Net debt per cash 
 flow (2,3,5)      (1,167.1)      (149.8)           -      (13.0)         (5.3)          3.0              -  (1,332.2) 
-----------------  ---------  -----------  ----------  ----------  ------------  -----------  -------------  --------- 
 

(1) The cash flows from bank loans, US private placement senior notes, US senior notes and other loans make up the net increase/(decrease) in loans in the cash flow statement, net of transaction costs.

(2) Within the Group's definition of net debt, the US private placement is included at its face value of $380 million (30 June 2018: $380 million; 31 December 2018: $380 million), reflecting the fact that the liabilities will be in place until maturity. This is $5.8 million lower (30 June 2018: $4.9 million higher; 31 December 2018: $2.1 million higher) than its carrying value.

(3) Within the Group's definition of net debt the senior notes are included at their face value of $500 million (30 June 2018: $500 million; 31 December 2018: $500 million) reflecting the fact that the liabilities will be in place until maturity. This is $17.3 million lower (30 June 2018: $0.3 million lower; 31 December 2018: $4.0 million lower than its carrying value.

(4) Net debt for covenant purposes includes lease liabilities previously accounted for as finance leases under IAS 17. For the purposes of net debt we have analysed lease liabilities between the previous obligations under finance leases and additional lease liabilities recognised following the adoption of IFRS 16.

(5) Alternative Performance Measures are reconciled to IFRS measures and explained in Note 19, the Alternative Performance Measures section.

(6) The cash outflow within net debt classified as held for sale for the period ended 30 June 2019 includes $3.0 million repayment of borrowings and $5.8 million payment of lease liabilities.

13. Acquisitions

On 24 June 2019 the Group's Ontic business has acquired an exclusive licence agreement for signal conditioners, military chip detectors, cockpit indicators and connector harnesses from Meggitt for a total consideration of $12.0 million. Ontic has paid $11.5 million upfront and the remaining $0.5 million is deferred consideration.

In the half year, $10.7 million of deferred and contingent consideration was paid in relation to prior year acquisitions in Ontic (30 June 2018: $3.1 million; 31 December 2018 $3.7 million including the 2018 acquisition of Honeywell).

Prior period acquisitions

As disclosed in the 2018 Annual Report, Signature completed the acquisition of EPIC Aviation LLC doing business as EPIC Fuels ("EPIC"). In the period, the purchase price accounting has been finalised, the measurement period adjustments resulting a increase in goodwill of $0.5 million. Further consideration of $2.9 million was paid in January 2019 representing the final working capital adjustment.

As disclosed in the 2018 Annual Report, Ontic completed the acquisition of Firstmark Corp ("Firstmark") on 20 November 2018. The transaction remains in the measurement period and the purchase price accounting will be finalised in the 2019 annual report. In the period, provisional measurement period adjustments have been recognised resulting in an increase in goodwill of $0.8 million and further consideration of $0.4 million was paid in April 2019 representing the final working capital adjustment.

No other measurement period adjustments have been made in the period. Further information in relation to the purchase price accounting for these acquisitions is available in the 2018 annual report and accounts.

14. Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are detailed below.

During the period, Group companies entered into the following transactions with related parties who are not members of the Group:

 
                                     Sales of goods                         Purchases of goods 
----------------------  ---------------------------------------  --------------------------------------- 
                         Six months   Six months                  Six months   Six months 
                              ended        ended     Year ended        ended        ended     Year ended 
                            30 June      30 June    31 December      30 June      30 June    31 December 
                               2019         2018           2018         2019         2018           2018 
                                 $m           $m             $m           $m           $m             $m 
----------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 Associates and joint 
  ventures                      2.5          2.3            4.3        367.1        366.9          738.8 
----------------------  -----------  -----------  -------------  -----------  -----------  ------------- 
 
 
                             Amounts owed by related           Amounts owed to related 
                                     parties                           parties 
----------------------  --------------------------------  -------------------------------- 
                         30 June   30 June   31 December   30 June   30 June   31 December 
                            2019      2018          2018      2019      2018          2018 
                              $m        $m            $m        $m        $m            $m 
----------------------  --------  --------  ------------  --------  --------  ------------ 
 Associates and joint 
  ventures                   0.2       0.1           0.6      65.1      85.8          82.1 
----------------------  --------  --------  ------------  --------  --------  ------------ 
 

Purchases of goods principally relates to the purchase of aviation fuel including excise taxes. Purchases were made at market price, discounted to reflect the quantity of goods purchased. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.

At the balance sheet date, Group companies had loan receivables from associates and joint ventures of $0.2 million (30 June 2018: $0.1 million; 31 December 2018: $0.6 million). The loans are unsecured and will be settled in cash, and were made on terms which reflect the relationships between the parties.

The Group has various pension and other post-retirement benefit schemes for its employees. Details are set out in note 15.

15. Pensions and other post-retirement benefits

The Group operates a number of plans worldwide, both of the defined benefit and defined contribution type. The defined benefit obligation at 30 June 2019 for the UK Income and Protection Plan (the "IPP" or "UK Plan") under IAS 19 is estimated based on the latest completed actuarial valuation as at 31 March 2018, with assumptions updated to reflect market conditions as at 30 June 2019 where appropriate.

The IPP closed to future accrual on 31 May 2016. The defined benefit plan assets have been updated to reflect their market value as at 30 June 2019. The Group's foreign retirement obligations relate to a number of arrangements in North America. Pension costs are calculated by independent qualified actuaries, using the projected unit method and assumptions appropriate to the arrangements in place.

As at 30 June 2019, the IAS 19 valuation of the UK plan and US schemes, indicate a net deficit of $32.7 million (30 June 2018: $44.5 million; 31 December 2018: $28.2 million).

During the first half of 2019, the Group agreed a revised schedule of payments to the IPP. Payments due as at 30 June 2019 are as follows:

   --      GBP0.3 million per annum from 30 June 2019 to 31 December 2020; 

-- Additional contributions of GBP3.4 million per annum from 30 June 2019 to 30 September 2021;

-- GBP2.7 million per annum from 30 June 2019 to March 2034 (through an Asset-Backed Funding arrangement (ABF))

The ABF structure consists of a Scottish Limited Partnership (SLP), formed between two newly incorporated subsidiaries of the Group and the Trustee of the IPP. The SLP has a long-term inter-company loan receivable due from Ontic Engineering & Manufacturing UK Limited (Ontic UK), on which annual interest payments of GBP2.7 million are due over the term of the loan.

The ABF structure was established so that the three newly created entities are consolidated into the Group's financial statements. In addition, the interest in the SLP held by the IPP is not treated as an asset under IAS19, and therefore is not included as part of the Group's pensions disclosures under IAS19. Instead, the payments due to the IPP are treated as a series of payments which the Group has committed to make.

16. Discontinued operations

ERO divestiture

It was announced in March 2018 that ERO was under strategic review. At the end of May 2018, management committed to a plan to sell substantially all of the ERO 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 Middle East was not classified as a discontinued operation as its operations have now ceased.

The fair values of the assets held for sale are categorised within Level 2 of the fair value hierarchy on the basis that their fair value has been calculated using inputs that are observable in active markets which are related to the individual asset or liability.

Results of ERO discontinued operations

 
 
 
                                                    Six months ended                           Six months ended                     Year ended 31 December 
                                                        30 June 2019                               30 June 2018                                       2018 
-----------------  ------  -----------------------------------------  -----------------------------------------  ----------------------------------------- 
                                            Exceptional                                Exceptional                                Exceptional 
                                                    and                                        and                                        and 
                                                  other                                      other                                      other 
                            Underlying(1)         Items        Total   Underlying(1)         Items        Total   Underlying(1)         Items        Total 
                    Notes              $m            $m           $m              $m            $m           $m              $m            $m           $m 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 Revenue              2             265.4             -        265.4           257.6             -        257.6           533.6             -        533.6 
 Cost of sales                    (218.8)             -      (218.8)         (219.6)             -      (219.6)         (449.8)             -      (449.8) 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Gross profit                        46.6             -         46.6            38.0             -         38.0            83.8             -         83.8 
 Distribution 
  costs                            (16.9)             -       (16.9)          (14.2)             -       (14.2)          (29.3)             -       (29.3) 
 Administrative 
  expenses                         (10.2)             -       (10.2)          (16.1)             -       (16.1)          (30.3)             -       (30.3) 
 Other operating 
  income                                -             -            -               -             -            -             0.1             -          0.1 
 Restructuring costs                    -             -            -               -         (1.1)        (1.1)               -         (1.1)        (1.1) 
-------------------------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Operating profit/(loss) 
  including internal 
  Group charges                      19.5             -         19.5             7.7         (1.1)          6.6            24.3         (1.1)         23.2 
      Elimination of 
      internal Group 
          charges                     5.4             -          5.4             5.7             -          5.7            10.7             -         10.7 
-------------------------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Operating 
  profit/(loss)       2              24.9             -         24.9            13.4         (1.1)         12.3            35.0         (1.1)         33.9 
 Impairment 
  loss(2)                               -        (31.8)       (31.8)               -             -            -               -             -            - 
 Transaction 
  costs(3)                              -         (0.9)        (0.9)               -         (5.0)        (5.0)               -         (5.9)        (5.9) 
 Finance costs(4)                   (2.4)             -        (2.4)           (0.5)             -        (0.5)           (0.9)             -        (0.9) 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) before 
  tax                                22.5        (32.7)       (10.2)            12.9         (6.1)          6.8            34.1         (7.0)         27.1 
 Tax 
  (charge)/credit                   (5.4)           0.2        (5.2)           (2.6)           1.1        (1.5)           (9.9)           2.0        (7.9) 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) for 
  the period                         17.1        (32.5)       (15.4)            10.3         (5.0)          5.3            24.2         (5.0)         19.2 
-------------------------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 Attributable 
  to: 
 Equity holders 
  of BBA Aviation 
  plc                                17.1        (32.5)       (15.4)            10.3         (5.0)          5.3            24.2         (5.0)         19.2 
 Non-controlling                        -             -            -               -             -            -               -             -            - 
  interests 
-------------------------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Profit/(loss) for 
  the period                         17.1        (32.5)       (15.4)            10.3         (5.0)          5.3            24.2         (5.0)         19.2 
-------------------------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 Earnings                     Adjusted(1)                 Unadjusted     Adjusted(1)                 Unadjusted     Adjusted(1)                 Unadjusted 
  per share 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Basic pre 
  IFRS 16                            1.4c                     (1.8)c            1.0c                       0.5c            2.3c                       1.9c 
 Basic                               1.7c                     (1.5)c 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 Diluted pre 
  IFRS 16                            1.3c                     (1.8)c            1.0c                       0.5c            2.3c                       1.8c 
 Diluted                             1.6c                     (1.5)c 
-----------------  ------  --------------  ------------  -----------  --------------  ------------  -----------  --------------  ------------  ----------- 
 
 

(1) Underlying profit and adjusted earnings per share is stated before exceptional and other items.

(2) The impairment of $31.8 million reported in exceptional and other items represents impairment of net assets held for sale to fair value less costs to sell.

(3) Transaction costs of $0.9 million (30 June 2018: $5.0 million; 31 December 2018: $5.9 million) represents costs to sell incurred to date.

(4) Finance costs of $2.4 million (30 June 2018: $0.5 million; 31 December 2018: $0.9 million) includes $1.9 million of finance costs following the adoption of IFRS 16 (30 June 2018: $nil; 31 December 2018: $nil).

Alternative Performance Measures are reconciled to IFRS measures and explained in Note 19, the Alternative Performance Measures section.

Effect of the disposal Group on the financial position of the Group as at 30 June 2019.

 
 
                                              As at      As at          As at 
                                            30 June    30 June    31 December 
                                               2019       2018           2018 
                                  Note           $m         $m             $m 
-------------------------------  ------   ---------  ---------  ------------- 
 Assets held for sale 
 Non-current assets 
 Other intangible assets                       16.1       17.4           17.7 
 Property, plant and equipment                 58.5       77.7           80.8 
 Right of use assets                           71.2          -              - 
-------------------------------  ------   ---------  ---------  ------------- 
                                              145.8       95.1           98.5 
  --------------------------------------  ---------  ---------  ------------- 
 Current assets 
 Inventories                                  158.7      150.6          168.2 
 Trade and other receivables                  117.2      120.9          138.9 
 Cash and cash equivalents                      9.1        2.4            2.0 
----------------------------------------  ---------  ---------  ------------- 
                                              285.0      273.9          309.1 
  --------------------------------------  ---------  ---------  ------------- 
 Total assets held for sale                   430.8      369.0          407.6 
----------------------------------------  ---------  ---------  ------------- 
 
 Liabilities held for sale 
 Current liabilities 
 Trade and other payables                   (117.6)    (104.1)        (142.0) 
 Lease liabilities                            (9.3)          -              - 
 Borrowings                                       -          -          (3.0) 
 Provisions                                   (0.9)      (1.1)          (0.9) 
----------------------------------------  ---------  ---------  ------------- 
                                            (127.8)    (105.2)        (145.9) 
  --------------------------------------  ---------  ---------  ------------- 
 
 Non-current liabilities 
 Borrowings                                       -      (3.0)              - 
 Trade and other payables 
  due after one year                          (0.4)      (0.4)              - 
 Lease liabilities                           (58.9)          -              - 
 Provisions                                   (0.9)      (0.9)          (0.9) 
----------------------------------------  ---------  ---------  ------------- 
                                             (60.2)      (4.3)          (0.9) 
  --------------------------------------  ---------  ---------  ------------- 
 Total liabilities held 
  for sale                                  (188.0)    (109.5)        (146.8) 
----------------------------------------  ---------  ---------  ------------- 
 Net assets held for sale(1)                  242.8      259.5          260.8 
----------------------------------------  ---------  ---------  ------------- 
 
 

(1) The net assets of the ERO business held for sale as at 30 June 2019 exclude deferred tax liabilities of $17.0 million which have been recognised within the Group tax position (30 June 2018: deferred tax liabilities of $10.6 million, 31 December 2018: deferred tax liabilities of $15.3 million).

Cash flows (used in)/from ERO discontinued operations

 
                                     Six months   Six months     Year ended 
                                       ended 30     ended 30    31 December 
                                      June 2019    June 2018           2018 
                                             $m           $m             $m 
---------------------------------   -----------  -----------  ------------- 
 
 Net cash inflow/(outflow) from 
  operating activities                     33.5       (29.9)          (7.2) 
 Net cash outflow from investing 
  activities                              (6.1)       (11.5)         (16.1) 
 Net cash inflow/(outflow) from 
  financing activities                   (20.3)         42.1           23.6 
----------------------------------  -----------  -----------  ------------- 
 Net cash inflow for the period             7.1          0.7            0.3 
----------------------------------  -----------  -----------  ------------- 
 

(1) Net cash flows from operating activities in the period comprise operating profit $24.9 million (30 June 2018: $12.3 million; 31 December 2018: $33.9 million), transaction costs $0.3 million (30 June 2019: $5.0 million; 31 December 2018: $5.9 million), working capital inflow $8.8 million (30 June 2018: $47.9 million outflow; 31 December 2018: $44.2 million outflow), and tax paid $0.1 million (30 June 2018: $0.2 million received; 31 December 2018: $0.2 million received) in relation to the discontinued operations.

 
                                                      As at      As at          As at 
 Lease liabilities recognised within liabilities    30 June    30 June    31 December 
  held for sale                                        2019       2018           2018 
                                                         $m         $m             $m 
------------------------------------------------  ---------  ---------  ------------- 
 Minimum lease payments 
 Within one year                                       13.0          -              - 
 In the second to fifth years inclusive                32.4          -              - 
 More than five years                                 107.2          -              - 
------------------------------------------------  ---------  ---------  ------------- 
                                                      152.6          -              - 
------------------------------------------------  ---------  ---------  ------------- 
 Present value of minimum lease payments 
 Within one year                                        9.3          -              - 
 In the second to fifth years inclusive                20.5          -              - 
 More than five years                                  38.4          -              - 
------------------------------------------------  ---------  ---------  ------------- 
                                                       68.2          -              - 
------------------------------------------------  ---------  ---------  ------------- 
 Lease liabilities recognised in liabilities held 
  for sale 
 Current                                                9.3          -              - 
 Non-current                                           58.9          -              - 
------------------------------------------------  ---------  ---------  ------------- 
                                                       68.2          -              - 
------------------------------------------------  ---------  ---------  ------------- 
 
 
                                  Six months   Six months 
                                       Ended        Ended     Year Ended 
                                     30 June      30 June    31 December 
                                        2019         2018           2018 
                                          $m           $m             $m 
-------------------------------  -----------  -----------  ------------- 
 Amounts recognised in the condensed consolidated income statement 
  for discontinued operations 
 Interest on lease liabilities         (1.9)            -              - 
-------------------------------  -----------  -----------  ------------- 
                                       (1.9)            -              - 
-------------------------------  -----------  -----------  ------------- 
 

17. Share capital

Ordinary share capital as at 30 June 2019 amounted to $510.0 million (30 June 2018: $509.3 million; 31 December 2018: $509.3 million). During the period 1.9 million ordinary shares were issued to satisfy options exercised and the vesting of share awards under the Group's various share schemes (30 June 2018: 0.7 million; 31 December 2018: 1.0 million). The consideration for shares issued in respect of share options for the period ended 30 June 2019 $0.7 million (30 June 2018: $0.3 million; and 31 December 2018: $0.3 million).

The number of shares in issue as at 30 June 2019 was 1,048.2 million (30 June 2018: 1,046.2 million; 31 December 2018: 1,046.3 million).

18. Post balance sheet events

Proposed sale of Ontic

On 30 July 2019 the Group announced the proposed sale of Ontic, a leading provider of high-quality, OEM-licensed parts for legacy aerospace platforms, to CVC Fund Vll, for an enterprise value of $1,365 million.

The disposal is a class 1 transaction under the UK listing rules and is therefore conditional on approval of the shareholders, as well as being subject to regulatory consents. A circular containing further details of the Transaction, together with a notice to convene a general meeting expected to be in late August 2019 (General Meeting), will be sent to shareholders as soon as is practicable.

This disposal of the Ontic segment (Note 2) is expected to complete in Q4 2019.

19. Alternative performance measures

Introduction

We assess the performance of the Group using a variety of Alternative Performance Measures. We principally discuss the Group's results on an 'adjusted' and/or 'underlying' basis. Results on an adjusted basis are presented before exceptional and other items.

Alternative Performance Measures have been defined and reconciled to the nearest GAAP measure below, along with the rationale behind using the measures.

As set out in Note 1 Basis of preparation the Group has adopted IFRS 16 in the period. Under the transition option adopted comparatives are not restated. For comparability and where applicable, a reconciliation has been presented below to a pre IFRS 16 basis.

The Alternative Performance Measures we use are: organic revenue growth, underlying operating profit and margin, EBITDA and underlying EBITDA, underlying profit before tax, underlying deferred tax, cash basic and diluted earnings per ordinary share, return on invested capital, operating cash flow, free cash flow, cash conversion, and net debt. A reconciliation from these adjusted performance measures to the nearest measure prepared in accordance with IFRS is presented below. The Alternative Performance Measures we use may not be directly comparable with similarly titled measures used by other companies.

Where applicable, divisional measures are calculated in accordance with Group measures.

Exceptional and other items

The Group's Income Statement and segmental analysis separately identify trading results before exceptional and other items. The directors believe that presentation of the Group's results in this way is relevant to an understanding of the Group's financial performance, as exceptional and other items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing a meaningful analysis of the trading results of the Group. In determining whether an event or transaction is treated as an exceptional and other item, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

Examples of charges or credits meeting the above definition and which have been presented as exceptional items in the current and/or prior years include costs relating to acquisitions which are material to the associated business segment, costs related to strategic disposals (including those previously completed), significant restructuring programmes some of which span multiple years asset, and impairment charges. In the event that other items meet the criteria, which are applied consistently from year to year, they are treated as exceptional and other items. Other items include amortisation of intangible assets arising on acquisition and valued in accordance with IFRS 3. These charges are presented separately to improve comparability of the Group's underlying profitability with peer companies.

Exceptional and other items are disclosed and reconciled to the nearest GAAP measure in note 3 to the condensed consolidated Financial Statements.

Organic revenue growth

Organic revenue growth is a measure which seeks to reflect the performance of the Group that will contribute to long-term sustainable growth. As such, organic revenue growth excludes the impact of acquisitions or disposals, fuel price movements and foreign exchange movements. We focus on the trends in organic revenue growth.

A reconciliation from the growth in reported revenue, the most directly comparable IFRS measures, to the organic revenue growth is set out below.

 
                                                              Six months   Six months 
                                                                   ended        ended     Year ended 
                                                                 30 June      30 June    31 December 
                                                                    2019         2018           2018 
                                                                      $m           $m             $m 
-----------------------------------------------------------  -----------  -----------  ------------- 
 Revenue prior year (continuing operations)                      1,024.3        898.6        1,857.3 
 Revenue prior year (ERO discontinued operations)                  257.6        246.9          513.3 
 Revenue prior year (ASIG discontinued operations)                     -         38.2           38.4 
-----------------------------------------------------------  -----------  -----------  ------------- 
 Reported revenue prior period (continuing 
  and discontinued)                                              1,281.9      1,183.7        2,409.0 
 Rebase for foreign exchange movements(1)                          (8.6)         11.9           10.9 
 Rebase for fuel price movements(2)                               (10.7)         70.8          138.2 
 Rebase for disposals and discontinued operations 
  (note 16)                                                      (257.6)      (285.1)        (551.7) 
-----------------------------------------------------------  -----------  -----------  ------------- 
 Rebased comparative revenue                                     1,005.0        981.3        2,006.4 
-----------------------------------------------------------  -----------  -----------  ------------- 
 
 Reported revenue current period (continuing 
  and discontinued)                                              1,528.1      1,281.9        2,880.9 
 Add: Impact of adopting IFRS 16 (continuing)                        2.1            -              - 
 Less: Contribution from discontinued operations/disposals       (265.4)      (257.6)        (533.6) 
 Less: Contribution from acquisitions                            (251.6)        (5.0)        (304.8) 
-----------------------------------------------------------  -----------  -----------  ------------- 
 Organic revenue(3)                                              1,013.2      1,019.3        2,042.5 
-----------------------------------------------------------  -----------  -----------  ------------- 
 
 Organic revenue growth from continuing operations                  0.8%         3.9%           1.8% 
-----------------------------------------------------------  -----------  -----------  ------------- 
 

(1) Impact from foreign exchange is calculated based on the prior year revenue translated at the current year exchange rates.

(2) Impact from fuel price fluctuations is calculated based on the prior year revenue recognised at the current year fuel prices.

Underlying operating profit and margin

Underlying operating profit and margin are measures which seek to reflect the underlying performance of the Group that will contribute to long-term sustainable profitable growth. As such they exclude the impact of exceptional and other items. The directors focus on the trends in underlying operating profit and margins.

A reconciliation from operating profit, the most directly comparable IFRS measure, to the underlying operating profit and margin, is set out below.

 
                          Six months ended 30                  Six months ended                 Year ended 31 December 
                               June 2019                          30 June 2018                            2018 
                   Total   Continuing   Discontinued   Total   Continuing   Discontinued   Total   Continuing   Discontinued 
                      $m           $m             $m      $m           $m             $m      $m           $m             $m 
----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Operating 
  profit           156.0        131.1           24.9   128.2        115.9           12.3   261.5        227.6           33.9 
 Add: Exceptional and other items: 
  Amortisation 
   of intangible 
   assets 
   arising 
   on 
   acquisition 
   and valued 
   in accordance 
   with IFRS 3      47.9         47.9              -    43.5         43.5              -    88.8         88.8              - 
  Acquisition 
   related 
   transaction 
   costs               -            -              -       -            -              -     1.4          1.4              - 
  Restructuring 
   costs             1.4          1.4              -     8.8          7.7            1.1    10.0          8.9            1.1 
  Other 
   exceptional 
   items            11.4         11.4              -       -            -              -    13.5         13.5              - 
----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Exceptional 
  and other 
  items             60.7         60.7              -    52.3         51.2            1.1   113.7        112.6            1.1 
----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Underlying 
  operating 
  profit           216.7        191.8           24.9   180.5        167.1           13.4   375.2        340.2           35.0 
----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Underlying 
  operating 
  margin 
  (%)              14.2%        15.2%           9.4%   14.1%        16.3%           5.2%   13.0%        14.5%           6.6% 
----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 
 
 IFRS 16 impact on operating profit 
 Operating profit      156.0    131.1    24.9   128.2   115.9   12.3   261.5   227.6   33.9 
 Impact of IFRS 
  16                  (26.7)   (20.6)   (6.1)       -       -      -       -       -      - 
-------------------  -------  -------  ------  ------  ------  -----  ------  ------  ----- 
 Operating profit 
  pre IFRS 16          129.3    110.5    18.8   128.2   115.9   12.3   261.5   227.6   33.9 
-------------------  -------  -------  ------  ------  ------  -----  ------  ------  ----- 
 
 IFRS 16 impact on underlying operating profit 
------------------------------------------------------------------------------------------- 
 Underlying 
  operating profit     216.7    191.8    24.9   180.5   167.1   13.4   375.2   340.2   35.0 
 Impact of IFRS 
  16                  (26.7)   (20.6)   (6.1)       -       -      -       -       -      - 
-------------------  -------  -------  ------  ------  ------  -----  ------  ------  ----- 
 Underlying 
  operating profit 
  pre IFRS 16          190.0    171.2    18.8   180.5   167.1   13.4   375.2   340.2   35.0 
-------------------  -------  -------  ------  ------  ------  -----  ------  ------  ----- 
 

EBITDA and underlying EBITDA

In addition to measuring the financial performance of the Group and lines of business based on underlying operating profit, we also measure performance based on EBITDA and underlying EBITDA. EBITDA is defined as the Group profit or loss before depreciation, amortisation, net finance expense and taxation. Underlying EBITDA is defined as EBITDA before exceptional and other items. EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies.

We consider EBITDA and underlying EBITDA to be useful measures of our operating performance because they approximate the underlying operating cash flow by eliminating depreciation and amortisation. EBITDA and underlying EBITDA are not direct measures of our liquidity, which is shown by our cash flow statement, and need to be considered in the context of our financial commitments.

A reconciliation from profit or loss to EBITDA and underlying EBITDA, is set out below.

 
                          Six months ended                    Six months ended                 Year ended 31 December 
                             30 June 2019                        30 June 2018                            2018 
                  Total   Continuing   Discontinued   Total   Continuing   Discontinued   Total   Continuing   Discontinued 
                     $m           $m             $m      $m           $m             $m      $m           $m             $m 
---------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Profit/(loss) 
  for the 
  period           31.4         46.8         (15.4)    66.7         61.4            5.3   137.9        118.7           19.2 
 Add: Finance 
  costs            77.2         74.8            2.4    27.7         27.2            0.5    67.9         67.0            0.9 
 Less: 
  Investment 
  income          (1.2)        (1.2)              -   (0.3)        (0.3)              -   (0.7)        (0.7)              - 
 Add: Tax 
  charge           15.9         10.7            5.2    16.3         14.8            1.5    36.4         28.5            7.9 
 Add: 
  Depreciation 
  and 
  amortisation    131.9        131.9              -    85.0         81.3            3.7   170.0        166.3            3.7 
 Add: 
  Impairment 
  and other 
  charges          32.7            -           32.7    17.8         12.8            5.0    20.0         14.1            5.9 
 EBITDA           287.9        263.0           24.9   213.2        197.2           16.0   431.5        393.9           37.6 
---------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Acquisition 
  related 
  transaction 
  costs               -            -              -       -            -              -     1.4          1.4              - 
 Restructuring 
  costs             1.4          1.4              -     8.8          7.7            1.1    10.0          8.9            1.1 
 Amounts 
  related 
  to previously 
  disposed 
  businesses       10.4         10.4              -       -            -              -     2.3          2.3              - 
 Other 
  exceptional 
  items             1.0          1.0              -       -            -              -    11.2         11.2              - 
 Underlying 
  EBITDA          300.7        275.8           24.9   222.0        204.9           17.1   456.4        417.7           38.7 
---------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 

EBITDA and underlying EBITDA - continued

The following tables summarises the impact of adopting IFRS 16 on the Group's profit/(loss) for the period, EBITDA and underlying EBITDA for the period ended 30 June 2019.

 
                           Six months ended                    Six months ended                 Year ended 31 December 
                             30 June 2019                         30 June 2018                            2018 
                   Total   Continuing   Discontinued   Total   Continuing   Discontinued   Total   Continuing   Discontinued 
                      $m           $m             $m      $m           $m             $m      $m           $m             $m 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 
 IFRS 16 impact on profit/(loss) for the period 
 Profit/(loss) 
  for the 
  period            31.4         46.8         (15.4)    66.7         61.4            5.3   137.9        118.7           19.2 
 Impact of IFRS 
  16                 7.1         10.2          (3.1)       -            -              -       -            -              - 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Profit/(loss) 
  for the 
  period 
  pre IFRS 16 
  (1)               38.5         57.0         (18.5)    66.7         61.4            5.3   137.9        118.7           19.2 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 
 IFRS 16 impact on EBITDA 
 EBITDA            287.9        263.0           24.9   213.2        197.2           16.0   431.5        393.9           37.6 
 Impact of IFRS 
  16              (70.9)       (64.8)          (6.1)       -            -              -       -            -              - 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 EBITDA pre 
  IFRS 16          217.0        198.2           18.8   213.2        197.2           16.0   431.5        393.9           37.6 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 
 IFRS 16 impact on underlying EBITDA 
 Underlying 
  EBITDA           300.7        275.8           24.9   222.0        204.9           17.1   456.4        417.7           38.7 
 Impact of IFRS 
  16              (70.9)       (64.8)          (6.1)       -            -              -       -            -              - 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Underlying 
  EBITDA pre 
  IFRS 16          229.8        211.0           18.8   222.0        204.9           17.1   456.4        417.7           38.7 
---------------  -------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 

Underlying profit before tax

Underlying profit before tax is a measure which seeks to reflect the underlying performance of the Group that will contribute to long-term sustainable profitable growth. As such underlying profit before tax excludes the impact of exceptional and other items. We focus on the trends in underlying profit before tax.

A reconciliation from profit before tax, the most directly comparable IFRS measures, to the underlying profit before tax, is set out below.

 
                          Six months ended                    Six months ended                 Year ended 31 December 
                             30 June 2019                        30 June 2018                            2018 
                  Total   Continuing   Discontinued   Total   Continuing   Discontinued   Total   Continuing   Discontinued 
                     $m           $m             $m      $m           $m             $m      $m           $m             $m 
---------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Profit/(loss) 
  before tax       47.3         57.5         (10.2)    83.0         76.2            6.8   174.3        147.2           27.1 
 Exceptional 
  and other 
  items 
  excluding tax 
  effect           93.4         60.7           32.7    70.1         64.0            6.1   133.7        126.7            7.0 
 Underlying 
  profit before 
  tax             140.7        118.2           22.5   153.1        140.2           12.9   308.0        273.9           34.1 
---------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 

The following tables summarises the impact of adopting IFRS 16 on the Group's profit/(loss) before tax and underlying profit/(loss) before tax.

 
 IFRS 16 impact on profit/(loss) before tax 
--------------------------------------------------------------------------------------- 
 Profit/(loss) 
  before tax        47.3    57.5   (10.2)    83.0    76.2    6.8   174.3   147.2   27.1 
 Impact of IFRS 
  16                 9.5    13.8    (4.3)       -       -      -       -       -      - 
----------------  ------  ------  -------  ------  ------  -----  ------  ------  ----- 
 Profit/(loss) 
  before tax 
  pre IFRS 16       56.8    71.3   (14.5)    83.0    76.2    6.8   174.3   147.2   27.1 
----------------  ------  ------  -------  ------  ------  -----  ------  ------  ----- 
 
 IFRS 16 impact on underlying profit/(loss) before tax 
--------------------------------------------------------------------------------------- 
 Underlying 
  profit/(loss) 
  before tax       140.7   118.2     22.5   153.1   140.2   12.9   308.0   273.9   34.1 
 Impact of IFRS 
  16                 9.5    13.8    (4.3)       -       -      -       -       -      - 
----------------  ------  ------  -------  ------  ------  -----  ------  ------  ----- 
 Underlying 
  profit/(loss) 
  before tax 
  pre IFRS 16      150.2   132.0     18.2   153.1   140.2   12.9   308.0   273.9   34.1 
----------------  ------  ------  -------  ------  ------  -----  ------  ------  ----- 
 

Underlying deferred tax

Cash adjusted basic and diluted earnings per ordinary share set out in note 6 are calculated by removing exceptional and other items, the impact of IFRS 16 and underlying deferred tax to better reflect the underlying basic and diluted earnings per share.

A reconciliation from deferred tax, the most directly comparable IFRS measures, to the underlying deferred tax, is set out below:

 
                            Six months ended                    Six months ended                 Year ended 31 December 
                               30 June 2019                        30 June 2018                            2018 
                    Total   Continuing   Discontinued   Total   Continuing   Discontinued   Total   Continuing   Discontinued 
                       $m           $m             $m      $m           $m             $m      $m           $m             $m 
-----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Total deferred 
  tax 
  (credit)/charge   (2.7)        (4.8)            2.1   (1.1)        (2.3)            1.2   (0.5)        (6.7)            6.2 
 Adjust for 
  exceptional 
  deferred tax 
  charge/(credit)    13.6         14.0          (0.4)    13.6         14.1          (0.5)    26.6         27.4          (0.8) 
 Impact of IFRS 
  16                  1.8          2.9          (1.1)       -            -              -       -            -              - 
-----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Underlying 
  deferred 
  tax 
  charge/(credit)    12.7         12.1            0.6    12.5         11.8            0.7    26.1         20.7            5.4 
-----------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 

Cash basic and diluted earnings per ordinary share

As set out in note 6, the adjusted basic and diluted earnings per ordinary share are calculated using the adjusted basic and diluted earnings.

A reconciliation from the basic and diluted earnings per ordinary share, the most directly comparable IFRS measure, to the cash basic and diluted earnings per ordinary share is set out below.

 
                Six months ended                            Six months ended                 Year ended 31 December 
                 30 June 2019                                  30 June 2018                            2018 
                Total   Continuing   Discontinued   Total   Continuing   Discontinued   Total   Continuing   Discontinued 
                    c            c              c       c            c              c       c            c              c 
-------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Basic 
  earnings 
  per share 
  pre 
  IFRS 16         3.7          5.5          (1.8)     6.5          6.0            0.5    13.4         11.5            1.9 
 Adjustments 
  for 
  adjusted 
  measure         8.9          5.6            3.3     6.5          5.9            0.6    12.5         11.5            1.0 
-------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Cash basic 
  earnings 
  per share 
  pre 
  IFRS 16        12.6         11.1            1.5    13.0         11.9            1.1    25.9         23.0            2.9 
-------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 
 Diluted 
  earnings 
  per share 
  pre 
  IFRS 16         3.7          5.5          (1.8)     6.4          5.9            0.5    13.2         11.4            1.8 
 Adjustments 
  for 
  adjusted 
  measure         8.8          5.5            3.3     6.4          5.9            0.5    12.4         11.4            1.0 
-------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 Cash diluted 
  earnings 
  per 
  share pre 
  IFRS 
  16             12.5         11.0            1.5    12.8         11.8            1.0    25.6         22.8            2.8 
-------------  ------  -----------  -------------  ------  -----------  -------------  ------  -----------  ------------- 
 

Return on invested capital (ROIC)

Measuring ROIC ensures the Group is focused on efficient use of assets, with the target of operating returns generated across the cycle exceeding the cost of holding the assets.

ROIC is calculated by dividing the last twelve months underlying operating profit for ROIC by invested capital for ROIC, both of which are at the same exchange rate which is the average of the last 13 months' spot rate. The invested capital for ROIC is calculated by adding net assets for ROIC and net debt for ROIC, both of which are calculated by averaging their respective balance over the last 13 months.

As noted above the transition option adopted for IFRS 16 means comparative information is not available and therefore it is not possible to calculate ROIC on a reported post IFRS 16 basis.

A reconciliation from underlying operating profit to underlying operating profit for ROIC is set out below. In addition, a reconciliation from net assets, the most directly comparable IFRS measure, to invested capital for ROIC is set out below.

 
                                                Six 
                                             months    Six months               Six months   Six months           Year 
                                              ended         ended                    ended        ended          ended 
                                            30 June       30 June                  30 June      30 June    31 December 
                                               2019          2019     2019 Discontinued(1)         2018           2018 
                                              Total    Continuing                       $m        Total          Total 
                                                 $m            $m                                    $m             $m 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Underlying operating profit                  216.7         191.8                     24.9        180.5          375.2 
 Impact of IFRS 16                           (26.7)        (20.6)                    (6.1)            -              - 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Underlying operating profit pre 
  IFRS 16                                     190.0         171.2                     18.8        180.5          375.2 
 Underlying operating profit prior 
  period six months ended December            194.7         173.1                     21.6        185.7              - 
 Adjustments for FX                           (0.3)         (0.2)                    (0.1)        (0.1)              - 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Underlying operating profit pre 
  IFRS 16 for ROIC                            384.4         344.1                     40.3        366.1          375.2 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Net assets                                 1,865.7       1,622.9                    242.8      1,895.2        1,944.2 
 Add back impact of IFRS 16                     1.8           6.0                    (4.2)            -              - 
 Add back impairment made to disposal 
  Group                                           -        (31.8)                     31.8            -              - 
 Adjustments for FX and averaging              69.6          62.7                      6.9         39.4          (0.1) 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Pre IFRS 16 net assets for ROIC            1,937.1       1,659.8                    277.3      1,934.6        1,944.1 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 
 Borrowings                               (1,486.2)     (1,486.2)                        -    (1,341.4)      (1,441.1) 
 Lease liabilities                        (1,200.0)     (1,131.8)                   (68.2)        (1.3)          (4.3) 
 Add back Lease liabilities recognised 
  under IFRS 16                             1,196.2       1,128.0                     68.2 
 Cash and cash equivalents                    125.8         116.7                      9.1        150.0          111.3 
 Adjustments for FX and averaging            (59.3)        (50.7)                    (8.6)      (108.9)          (3.0) 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Less Pre IFRS 16 net debt for 
  ROIC(2)                                 (1,423.5)     (1,424.0)                      0.5    (1,301.6)      (1,337.1) 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 Pre IFRS 16 invested capital 
  for ROIC(2)                               3,360.6       3,083.8                    276.8      3,236.2        3,281.2 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 ROIC (%)                                     11.4%         11.2%                    14.6%        11.3%          11.4% 
---------------------------------------  ----------  ------------  -----------------------  -----------  ------------- 
 

(1) ROIC for discontinued operations has been calculated excluding $5.4 m of support costs borne by the continuing Group (30 June 2018: $5.7m, 31 December 2018: $10.7m)

(2) Excluding the impact of IFRS 16

Operating cash flow

Operating cash flow is one of the Group's Key Performance Indicators by which our financial performance is measured. Operating cash flow is defined as the aggregate of cash generated by operations, purchase of property, plant and equipment, purchase of intangible assets less Ontic licences not accounted for under IFRS 3, and proceeds from disposal of property, plant and equipment.

Operating cash flow is primarily an overall operational performance measure. However, we also believe it is an important indicator of our liquidity.

Operating cash flow reflects the cash we generate from operations after net capital expenditure which is a significant ongoing cash outflow associated with investing in our infrastructure. In addition, operating cash flow excludes cash flows that are determined at a corporate level independently of ongoing trading operations such as dividends, share buy-backs, acquisitions and disposals, financing costs, tax payments, dividends from associates and the repayment and raising of debt. Operating cash flow is not a measure of the funds that are available for distribution to shareholders.

A reconciliation from Group net cash flow from operating activities, the most directly comparable IFRS measure, to adjusted operating cash flow, is set out below.

 
                                                    Six months    Six months     Year ended 
                                                         ended         ended    31 December 
                                                       30 June       30 June           2018 
                                                          2019    2018 Total          Total 
                                                         Total            $m             $m 
                                                            $m 
-------------------------------------------------  -----------  ------------  ------------- 
 Net cash flow from operating activities                 273.3         177.1          368.3 
 Less: purchase of property, plant and equipment        (34.9)        (40.1)         (85.3) 
 Less: purchase of intangible assets                     (7.2)         (4.2)          (7.8) 
 Add: Ontic licences not accounted for under 
  IFRS 3                                                   1.0           1.2            1.2 
 Add: income tax paid                                     23.0          10.2           27.1 
 Add: proceeds from disposal of property, 
  plant and equipment                                      3.6           0.3            4.7 
 Operating cash flow                                     258.8         144.5          308.2 
-------------------------------------------------  -----------  ------------  ------------- 
 
 Impact on Net cash flow from operating activities pre IFRS 16 
 
 Net cash flow from operating activities                 273.3         177.1          368.3 
 IFRS 16 impact                                         (70.6)             -              - 
 Net cash flow from operating activities 
  pre IFRS 16                                            202.7         177.1          368.3 
-------------------------------------------------  -----------  ------------  ------------- 
 
 Impact on Operating cash flow by pre IFRS 16 
 
 Operating cash flow                                     258.8         144.5          308.2 
 IFRS 16 impact                                         (70.6)             -              - 
 Operating cash flow pre IFRS 16                         188.2         144.5          308.2 
-------------------------------------------------  -----------  ------------  ------------- 
 

Free cash flow

Free cash flow represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base. Free cash flow is set out in note 11 and reconciled to net cash inflow from operating activities, the most directly comparable IFRS measure.

Cash conversion

Cash conversion is a key part of the Group strategy for disciplined capital management with absolute cash generation and strong cash conversion. Cash conversion is defined as operating cash flow as a percentage of continuing and discontinued operating profit. Operating cash flow has been reconciled above to the most directly comparable IFRS measure, being cash generated from operations.

 
                                  Six months   Six months     Year ended 
                                       ended        ended    31 December 
                                     30 June      30 June           2018 
                                        2019         2018          Total 
                                       Total        Total              % 
                                           %            % 
-------------------------------  -----------  -----------  ------------- 
 Cash conversion                        166% 
 Cash conversion (pre IFRS 16)          146%         113%           118% 
-------------------------------  -----------  -----------  ------------- 
 

Net debt

Net debt consists of borrowings (both current and non-current), less cash and cash equivalents, the fair value adjustment on the US private placement senior notes and the fair value adjustment on the US senior notes.

Net debt is a measure of the Group's net indebtedness that provides an indicator of the overall balance sheet strength. It is also a single measure that can be used to assess both the Group's cash position and its indebtedness. The use of the term 'net debt' does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities included in this measure.

Net debt is considered to be an alternative performance measure as it is not defined in IFRS. The most directly comparable IFRS measure is the aggregate of borrowings (current and non-current), and cash and cash equivalents. A reconciliation from these to net debt is given below.

 
                                                                                                             As at 31 December 
                            As at 30 June 2019                      As at 30 June 2018                              2018 
                       Total   Continuing   Discontinued       Total   Continuing   Discontinued       Total   Continuing   Discontinued 
                          $m           $m             $m          $m           $m             $m          $m           $m             $m 
----------------  ----------  -----------  -------------  ----------  -----------  -------------  ----------  -----------  ------------- 
 Borrowings        (1,486.2)    (1,486.2)              -   (1,341.4)    (1,338.4)          (3.0)   (1,441.1)    (1,438.1)          (3.0) 
 Amortisation 
  costs               (16.2)       (16.2)              -      (20.0)       (20.0)              -      (17.6)       (17.6)              - 
 Fair value 
  adjustment 
  on USPP senior 
  notes                  5.8          5.8              -       (4.9)        (4.9)              -       (2.1)        (2.1)              - 
 Fair value 
  adjustment 
  on US senior 
  notes                 17.3         17.3              -         0.3          0.3              -         4.0          4.0              - 
 Total principal 
  of borrowings    (1,479.3)    (1,479.3)              -   (1,366.0)    (1,363.0)          (3.0)   (1,456.8)    (1,453.8)          (3.0) 
 Cash and cash 
  equivalents          125.8        116.7            9.1       150.0        147.6            2.4       111.3        109.3            2.0 
----------------  ----------  -----------  -------------  ----------  -----------  -------------  ----------  -----------  ------------- 
 Total net 
  principal 
  of borrowings    (1,353.5)    (1,362.6)            9.1   (1,216.0)    (1,215.4)          (0.6)   (1,345.5)    (1,344.5)          (1.0) 
 Amortisation 
  costs                 16.2         16.2              -        20.0         20.0              -        17.6         17.6              - 
 Lease 
  liabilities 
  for 
  covenants(1)         (3.8)        (3.8)              -       (1.3)        (1.3)              -       (4.3)        (4.3)              - 
 Net debt for 
  covenants 
  purposes(1)      (1,341.1)    (1,350.2)            9.1   (1,197.3)    (1,196.7)          (0.6)   (1,332.2)    (1,331.2)          (1.0) 
----------------  ----------  -----------  -------------  ----------  -----------  -------------  ----------  -----------  ------------- 
 Lease 
  liabilities(1)   (1,196.2)    (1,128.0)         (68.2)           -            -              -           -            -              - 
----------------  ----------  -----------  -------------  ----------  -----------  -------------  ----------  -----------  ------------- 
 Net debt 
  including 
  the impact 
  of IFRS 16       (2,537.3)    (2,478.2)         (59.1)   (1,197.3)    (1,196.7)          (0.6)   (1,332.2)    (1,331.2)          (1.0) 
----------------  ----------  -----------  -------------  ----------  -----------  -------------  ----------  -----------  ------------- 
 

(1) Net debt for covenant purposes includes lease liabilities previously accounted for as finance leases under IAS 17. For the purposes of net debt we have analysed lease liabilities between the previous obligations under finance leases and additional lease liabilities recognised following the adoption of IFRS 16.

20. Impact of adoption IFRS 16 leases

The following table summarises the impact of adopting IFRS 16 on the Group's condensed consolidated balance sheet as at 1 January 2019.

Impact on the condensed consolidated balance sheet as at 1 January 2019

 
 
                                                       As at                   As at 
                                                 31 December    IFRS 16    1 January 
                                                        2018     impact         2019 
                                       Note               $m         $m           $m 
------------------------------------  ------   -------------  ---------  ----------- 
 
 Non-current assets 
 Goodwill                                            1,191.1          -      1,191.1 
 Other intangible assets                             1,329.4          -      1,329.4 
 Property, plant and equipment                         779.9          -        779.9 
 Right of use assets                                       -    1,088.2      1,088.2 
 Interests in associates 
  and joint ventures                                    53.5          -         53.5 
 Trade and other receivables                            18.8       24.4         43.2 
Deferred tax asset                                         -          -            - 
                                      ------ 
                                                     3,372.7    1,112.6      4,485.3 
 
 Current assets 
 Inventories                                           120.3          -        120.3 
 Trade and other receivables                           260.2        2.6        262.8 
 Cash and cash equivalents                             109.3          -        109.3 
 Tax recoverable                                         1.1          -          1.1 
Assets held for sale                                   407.6       61.8        469.4 
 
                                                       898.5       64.4        962.9 
 
Total assets                                         4,271.2    1,177.0      5,448.2 
 
 
 Current liabilities 
 Trade and other payables                            (439.2)       24.9      (414.3) 
 Tax liabilities                                      (39.8)          -       (39.8) 
 Lease liabilities                                     (1.1)     (52.9)       (54.0) 
 Borrowings                                            (1.5)          -        (1.5) 
 Provisions                                           (23.0)        0.5       (22.5) 
Liabilities held for sale                            (146.8)     (61.8)      (208.6) 
 
                                                     (651.4)     (89.3)      (740.7) 
 
Net current assets                                     247.1     (24.9)        222.2 
 
 
 Non-current liabilities 
 Borrowings                                        (1,436.6)          -    (1,436.6) 
 Trade and other payables 
  due after one year                                   (7.6)          -        (7.6) 
 Pensions and other post-retirement 
  benefits                                            (28.2)          -       (28.2) 
 Deferred tax liabilities                            (162.8)      (1.8)      (164.6) 
 Lease liabilities                                     (3.2)  (1,083.8)    (1,087.0) 
Provisions                                            (37.2)        3.2       (34.0) 
 
                                                   (1,675.6)   (1082.4)    (2,758.0) 
 
Total liabilities                                  (2,327.0)  (1,171.7)    (3,498.7) 
 
Net assets                                           1,944.2        5.3      1,949.5 
 
 
 Equity 
 Share capital                                         509.3          -        509.3 
 Share premium account                               1,594.5          -      1,594.5 
 Other reserve                                         (7.2)          -        (7.2) 
 Treasury reserve                                     (95.3)          -       (95.3) 
 Capital reserve                                        56.2          -         56.2 
 Hedging and translation 
  reserves                                           (105.7)          -      (105.7) 
Retained earnings                                      (9.9)        5.3        (4.6) 
 
Equity attributable to equity holders 
 of BBA Aviation plc                                 1,941.9        5.3      1,947.2 
Non-controlling interest                                 2.3          -          2.3 
 
Total equity                                         1,944.2        5.3      1,949.5 
 
 

The following tables summarises the impact of adopting IFRS 16 on the Group's condensed consolidation income statement and condensed consolidated interim statement of cash flows for the period ended 30 June 2019 and the condensed consolidated balance sheet as at 30 June 2019

Impact on the condensed consolidated interim income statement

Six months ended 30 June 2019

 
                                         Six months           Six months    Six months 
                                              ended                ended         ended 
                                            30 June              30 June       30 June 
                                            2019 as  IFRS 16    2019 pre          2018 
                                           reported   impact     IFRS 16   as reported 
                                  Note           $m       $m          $m            $m 
-------------------------------- 
 
 Continuing operations 
 Revenue                                    1,262.7      2.1     1,264.8       1,024.3 
Cost of sales                               (978.0)   (22.4)   (1,000.4)       (770.2) 
 Gross profit/(loss)                          284.7   (20.3)       264.4         254.1 
 Distribution costs                           (4.9)        -       (4.9)         (5.1) 
 Administrative expenses                    (138.9)    (0.3)     (139.2)       (127.6) 
 Other operating income                         2.1        -         2.1           1.3 
 Share of profit of associates 
  and joint ventures                            1.6        -         1.6           1.7 
 Other operating expenses                    (12.1)        -      (12.1)         (0.8) 
 Restructuring costs                          (1.4)        -       (1.4)         (7.7) 
--------------------------------------- 
 Operating profit/(loss)                      131.1   (20.6)       110.5         115.9 
 Impairment of assets                             -        -           -        (12.8) 
 Investment income                              1.2    (0.9)         0.3           0.3 
 Finance costs                               (74.8)     35.3      (39.5)        (27.2) 
--------------------------------------- 
 Profit/(loss) before tax                      57.5     13.8        71.3          76.2 
 Tax expense                                 (10.7)    (3.6)      (14.3)        (14.8) 
--------------------------------------- 
 Profit/(loss) from continuing 
  operations                                   46.8     10.2        57.0          61.4 
 
 (Loss)/profit from ERO 
  discontinued operations, 
  net of tax(1)                              (15.4)    (3.1)      (18.5)           5.3 
--------------------------------------- 
 Profit for the period                         31.4      7.1        38.5          66.7 
--------------------------------------- 
 
 Attributable to: 
 Equity holders of BBA Aviation 
  plc                                          31.2      7.1        38.3          66.7 
 Non-controlling interests                      0.2        -         0.2             - 
--------------------------------------- 
 Profit for the period                         31.4      7.1        38.5          66.7 
--------------------------------------- 
 

(1) (Loss)/profit from ERO discontinued operations includes $2.4 million of finance costs of which $1.9m represents finance costs relating to the adoption of IFRS 16.

Impact on the condensed consolidated balance sheet

As at 30 June 2019

 
                                                                        30 June 
                                                  30 June                  2019   31 December 
                                                     2019    IFRS 16   pre IFRS          2018 
                                              as reported     impact         16   as reported 
                                     Note              $m         $m         $m            $m 
 
Non-current assets 
Goodwill                                          1,193.1          -    1,193.1       1,191.1 
Other intangible assets                           1,293.0          -    1,293.0       1,329.4 
Property, plant and equipment                       765.4          -      765.4         779.9 
Right of use assets                               1,065.1  (1,065.1)          -             - 
Interests in associates 
 and joint ventures                                  52.2          -       52.2          53.5 
Trade and other receivables                          55.3     (23.1)       32.2          18.8 
                                                  4,424.1  (1,088.2)    3,335.9       3,372.7 
Current assets 
Inventories                                         137.8          -      137.8         120.3 
Trade and other receivables                         257.0      (2.7)      254.3         260.2 
Cash and cash equivalents                           116.7          -      116.7         109.3 
Tax recoverable                                       0.9          -        0.9           1.1 
Assets held for sale                                430.8     (71.2)      359.6         407.6 
                                                    943.2     (73.9)      869.3     898.5 
Total assets                                      5,367.3  (1,162.1)    4,205.2       4,271.2 
 
Current liabilities 
Trade and other payables                          (406.7)     (27.1)    (433.8)       (439.2) 
Tax liabilities                                    (35.2)      (0.7)     (35.9)        (39.8) 
Lease liabilities                                  (57.9)       56.8      (1.1)         (1.1) 
Borrowings                                              -          -          -         (1.5) 
Provisions                                         (24.2)      (0.5)     (24.7)        (23.0) 
Liabilities held for sale                         (188.0)       67.0    (121.0)       (146.8) 
                                                  (712.0)       95.5    (616.5)       (651.4) 
Net current assets                                  231.2       21.6      252.8         247.1 
 
Non-current liabilities 
Borrowings                                      (1,486.2)          -  (1,486.2)     (1,436.6) 
Trade and other payables 
 due after one year                                 (1.4)          -      (1.4)         (7.6) 
Pensions and other post-retirement 
 benefits                                          (32.7)          -     (32.7)        (28.2) 
Deferred tax liabilities                          (161.1)          -    (161.1)       (162.8) 
Lease liabilities                               (1,073.9)    1,071.2      (2.7)         (3.2) 
Provisions                                         (34.3)      (2.8)     (37.1)        (37.2) 
                                                (2,789.6)    1,068.4  (1,721.2)     (1,675.6) 
Total liabilities                               (3,501.6)    1,163.9  (2,337.7)     (2,327.0) 
Net assets                                        1,865.7     1.8       1,867.5       1,944.2 
 
Equity 
Share capital                                       510.0          -      510.0         509.3 
Share premium account                             1,594.5          -    1,594.5       1,594.5 
Other reserve                                       (7.2)          -      (7.2)         (7.2) 
Treasury reserve                                  (102.5)          -    (102.5)        (95.3) 
Capital reserve                                      61.1          -       61.1          56.2 
Hedging and translation 
 reserves                                         (104.8)          -    (104.8)       (105.7) 
Retained earnings                                  (87.6)        1.8     (85.8)         (9.9) 
Equity attributable to equity 
 holders of BBA Aviation 
 plc                                              1,863.5        1.8    1,865.3       1,941.9 
Non-controlling interest                              2.2          -        2.2           2.3 
Total equity                                      1,865.7        1.8    1,867.5       1,944.2 
 

Impact on the condensed consolidated interim statement of cash flows

Six month ended 30 June 2019

 
                                           30 June                30 June       30 June 
                                              2019  IFRS 16          2019          2018 
                                       as reported   impact   pre IFRS 16   as reported 
                                                $m       $m            $m            $m 
Operating activities                         273.3   (70.6)         202.7         177.1 
Net cash flow from operating 
 activities 
 
Investing activities 
Interest received                              0.3        -           0.3           0.3 
Interest received on sublease 
 assets                                        0.9    (0.9)             -             - 
Capital element of finance sublease 
 assets                                        1.3    (1.3)             -             - 
Dividends received from associates             2.9        -           2.9           1.7 
Purchase of property, plant 
 and equipment                              (34.9)        -        (34.9)        (40.1) 
Purchase of intangible assets                (7.2)        -         (7.2)         (4.2) 
Proceeds from disposal of property, 
 plant and equipment                           3.6        -           3.6           0.3 
Acquisition of businesses, net 
 of cash/(debt) acquired                    (25.5)        -        (25.5)        (21.3) 
Investment in assets classified 
 as financial instruments measured 
 through other comprehensive 
 income (FVTOCI)                                 -        -             -         (5.2) 
Net cash (outflow) from investing 
 activities                                 (58.6)    (2.2)        (60.8)        (68.5) 
 
Financing activities 
Interest paid                               (38.7)        -        (38.7)        (21.8) 
Interest element on leases paid             (37.2)     37.2             -             - 
Dividends paid                             (103.9)        -       (103.9)        (99.3) 
Gains/(Losses) from realised 
 foreign exchange contracts                    5.5        -           5.5         (2.7) 
Proceeds from issue of ordinary 
 shares net of issue costs                     0.7        -           0.7           0.3 
(Purchase)/sale of own shares                (2.8)        -         (2.8)         (5.4) 
(Decrease)/increase in loans                  23.3        -          23.3          26.8 
Payments of lease liabilities               (36.1)     35.6         (0.5)             - 
(Decrease)/increase in overdrafts            (1.5)        -         (1.5)         (3.3) 
Net cash outflow from financing 
 activities                                (190.7)     72.8       (117.9)       (105.4) 
 
Increase/(decrease) in cash 
 and cash equivalents                         24.0        -          24.0           3.2 
Cash and cash equivalents at 
 beginning of the period                     111.3        -         111.3         153.5 
Exchange adjustments                         (9.5)        -         (9.5)         (6.7) 
Cash and cash equivalents at 
 end of the period                           125.8        -         125.8         150.0 
 

21. Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication on pages 45 - 46 of the annual report for the year ended 31 December 2018. The risks and uncertainties are summarised below:

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

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

-- 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).

   --      Ongoing competitor activity to replicate market position of Signature network. 

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

   --      Potential liabilities from defects in services and products. 
   --      Impact of a successful cyber-attack. 

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

   --      Environmental exposures. 

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

-- Changes in tax regulation in both the USA and EMEA could impact the Group's effective tax rate and cash tax liabilities.

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

Independent Review Report to BBA Aviation plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the consolidated statement of changes in equity, and related notes 1 to 21. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Statutory Auditor

London, United Kingdom

2 August 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR CKBDQOBKDFFK

(END) Dow Jones Newswires

August 05, 2019 02:00 ET (06:00 GMT)

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