signature aviation/media/files/s/signature-aviatio… · signature aviation 2019 final results...

Signature Aviation 2019 Interim Results

2019 Final Results

Signature Aviation

Mark Johnstone (CEO)

David Crook (FD)

Signature Aviation 2019 Final Results

2019 – Transformational Year

• Ontic disposal

• $1bn of capital returned to shareholders

• Restructured debt at lower cost with longer

maturity

• Portfolio refocused – rebranded Signature

Aviation

1


Signature Aviation – improved outperformance

• Signature outperformed the flat US B&GA

market

• Revenue management actions taken

improved H2 outperformance to 100 bps

• IAM Jet Centre acquisition of 5 sole source

locations in August 2019

• Continued investment in employee

engagement and customer experience

• Continued strong cash generation from

Signature business

2


Signature Aviation – a sustainable future

• Strategic partnership with Uber Elevate

• Leading industry to improve availability of

Sustainable Aviation Fuel (SAF)

• Ongoing focus on reducing our own carbon

footprint

3


Performance ReviewDavid Crook

Group Finance Director


Organic revenue growth

• Signature FBO up 1.1%

• FAA US B&GA movement growth of 0.2%

• Outperformance 100 bps in H2

Signature: FBO outperforms by 90 bps

5

Note 1: Underlying operating profit (pre exceptional and other items)

Signature Operating Profit1 ($m)

Operating profit1

• Cost initiatives offsetting labour cost impacts in

H2 for Signature FBO

• Initial contribution from IAM Jet Centre

acquisition $1m

• TECHNICAirTM rationalised and right-sized down

$4m ($1m disposal and $3m organic decline)

• EPIC up $5m, includes full year effect of

acquisition of $3m plus $2m organic growth

320.6

(1.4) - (1.0)

318.2 3.9

(3.6) (1.1)

43.6 361.0

2018 FX Fuel Disposals 2018 Like for Like

IAM & EPICacquisitions

SignatureFBO

EPIC/TECHNICAir

IFRS 16 2019


Underlying central costs

• Reduced through cost discipline and FX

• Full integration of corporate functions

into Signature is underway

Signature Aviation central costs

6

Underlying operating profit

($m) 20191 2018

Signature 361.0 320.6

Central costs pre IFRS 16 (26.7) (28.3)

Central costs IFRS 16 0.8 -

Central costs (25.9) (28.3)

Signature Aviation 335.1 292.3

Note 1: Underlying operating profit pre IFRS 16 (pre exceptional and other items)


Signature

• Highly cash generative business

($212m ex fuel supply working capital

one-off and exceptionals)

• Direct fuel supply strategy with refiners

results in one time working capital

impact of $69m

• Negative working capital operating

model

• Flexible capex deployment

• Longer term financing in place to better

match long lease terms

• Cash tax rate remains low at 14%

Signature – free cash flow – a core strength

7

Note 1: Underlying EBITDA before exceptional and other items and net interest paid, presented on a pre IFRS 16 basis

Signature only

($m) 2019 2018

Underlying EBITDA1 348.7 346.2

Working capital movement (41.2) 26.8

Capex (66.3) (70.5)

Net Interest paid (65.2) (57.4)

Tax paid (41.4) (26.9)

Exceptional (13.7) (11.5)

All other movements 8.2 (1.5)

Free cash flow 129.1 205.2

Distributable free cash

flow (ex fuel supply one -

off & exceptionals)

212.0 216.7


• CVC are paying for Ontic support costs

during TSA period (commenced

November 2019)

• $11m of support costs relating to the

discontinued ERO business

• ERO support costs will be taken out

post completion/TSA

Support costs

8

Note 1: Underlying operating profit pre IFRS 16 (pre exceptional and other items)

Discontinued operations: Support costs

($m) 2019 2018 Change

Ontic support costs (2.9) (3.6) (19.4)%

ERO support costs (11.4) (10.7) 6.5%


Operating profit1

($m) 2019 20182 Change

Signature Aviation 335.1 291.64 -

Support costs (14.3) (14.3) -

Continuing

operations

320.8 277.3 -

Continuing operations

pre IFRS16

276.4 277.3 (0.3)%

Continuing EPS post

IFRS 16

16.3c - -

Continuing EPS pre

IFRS 16

18.2c 16.3c 11.7%

Adjusted FCF per

share325.0c 25.8c (3.1)%

Dividend 14.77c 14.07c 5.0%

Continuing operations (Signature)

• IFRS 16 adds $44m to operating profit

• Operating profit ex IFRS 16 flat

compared to 2018

• EPS impacted by IFRS 16 and low

effective tax rate

• Free cash flow per share is a more

appropriate measure for Signature

• Dividend increased by 5%

Continuing Group underlying income statement

9

Note 1: Underlying operating profit pre exceptional and other itemsNote 2: Restated for reclassification of Ontic as Discontinued

Note 3: Adjusted free cash flow per share based on number of shares post consolidation (838.5 million)Note 4: Includes $0.7m loss relating to ERO Middle East


Discontinued operations (Ontic & ERO)

• Ontic delivered operating profit of $67m for

the ten months of ownership

• Increase in ERO operating profit to $53m

reflects the IFRS 16 impact of $12m and

suspension of depreciation and

amortisation

• On a non held for sale, pre IFRS 16 basis

the underlying operating profit of ERO is

$18m (see appendices for further detail)

• EPS impacted by IFRS 16 and low

effective tax rate

Total Group underlying income statement

10

Note 1: Underlying operating profit pre exceptional and other itemsNote 2: Restated for reclassification of Ontic as Discontinued

Operating profit1

($m) 2019 20182 Change

Continuing

operations

320.8 277.3 -

Discontinued ops 120.3 97.9

Total Group 441.1 375.2

Total Group EPS post

IFRS 16

25.6c - -

Total Group EPS pre

IFRS 16

26.9c 23.3c 15.5%


Continuing operations (Signature)

• Amortisation of acquired intangibles:

$73.8m (non-cash)

• Restructuring expenses of $5.6m

Discontinued operations (Ontic & ERO)

• Ontic amortisation of $12.5m

• $724m gain on disposal of Ontic

• ERO disposal process costs of $3m

• ERO impairment $125m to reflect fair

value less costs to sell (non-cash)

• ERO fair value less cost to sell $178m

Previously disposed businesses

• $36m on previously disposed

businesses

Other

• $12m impairment of charter

management JV

Exceptional and other items – largely non-cash

11

Exceptional and other items

($m)

2019

P&L

2019

Cash

2020

Cash

Continuing ops

Amortisation (73.8)

Restructuring costs (5.6) (3.8) (1.8)

Discontinued ops

Ontic amortisation (12.5)

Ontic gain 724.0

ERO costs (2.8) (2.6) (0.2)

ERO impairment (124.7)

Previously disposed

businesses

(36.5) (10.0) (23.7)

GAMA impairment (12.5)

USPP make-whole (25.4) (25.5)

ERO fair value less costs to sell $178m


Covenant basis

• Leverage down at 2.2x

• Leverage on a covenant basis includes

the Ontic EBITDA for 10 months

• Funded progressive dividend payments

& acquisitions

• Covenants reset, providing 2x

headroom

Target leverage

• Target range of 2.5x-3.0x on a covenant

basis will be maintained

IFRS 16 basis (reported)

• $1.2 bn lease liabilities now on Balance

Sheet1

Leverage

12

Note 1: Including IRFS 16 liabilities classified as held for sale

Leverage

($m) 2019 2018

Net debt (Pre IFRS 16) (1,008.3) (1,332.2)

Net debt to EBITDA,

covenant basis

2.2x 2.8x

Covenant 4.25x 3.50x

Headroom 2.05x 0.70x

Net debt reported, under

IFRS 16

(2,250.7) 1


Central costs

• c.$27m Group underlying central costs

Support costs

• c.$11m ERO annual support costs

• ERO support costs to be eliminated post

disposal/TSA period

• Ontic support costs fully funded by CVC,

eliminate post TSA period

Capital expenditure (continuing group)

• $100m to $110m (incl. timing impact from

FY19)

Cash

• Ontic disposal tax payment of c.$85m

expected to be paid in April 2020

Guidance FY20

13

• Indemnification settlement on

previously disposed business of $23m

paid January 2020

• IFRS 16 no impact

Tax

• Underlying effective tax rate c25%,

• Cash tax rate c14% (excludes tax

payment on Ontic disposal)

Interest

• Interest expense $145m ($65m excl.

IFRS 16)

• Cash interest $65m

All guidance excludes any potential impact of COVID-19


Signature AviationMark Johnstone

Group Chief Executive Officer


2019 B&GA market performance

Market

• US B&GA movements grew 0.2% in 2019

• Continued volatility month to month

Market characteristics

• Continuing global market uncertainty

• Geopolitics unchanged

• Segmental performance unchanged

15


16

Sources: GDP: The Federal Reserve Bank of St. Louis. FAA: FAA Report for Business JetsSFS Market and FAA Segments: ARG/US business jet and turboprop excluding transport, aircraft used for cargo operations, and s cheduled regional airline within SFS Market

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

% c

hange

General Aviation Charter Fractional Total SFS Market Real GDP FAA

US market by segment – YoY movements


Signature Strategic Flight Plan

17

Growth

Operational efficiency and

process improvement

Environmentaland social

Customer experience

Employee experience

Value creation

Grow customer value through expanded network and offerings

Optimal resource and simple reliable processes

Company where everyone wants to work and thrive

Deliver apersonalised experience right,the first time and every time

Recognised as environmentallyand sociallyresponsibleleaders in our communities


Growth

Network

• IAM Jet Centre acquisition

• 3 disposals

Revenue optimisation

• Pricing initiatives countering headwinds

Non-fuel revenue growth

• Fuel card penetration in Signature network up

from c.3% to c.9%

• Real estate yield management

New services

• IAM included two ELITE ClassTM locations at

Barbados and Grenada

• Dedicated terminal for ELITE offering at Atlanta

18

Construction at Atlanta Hartsville FBO




Operational efficiency and process improvement

19

LEEP

• Labour efficiency improving

• GSE fleet modernisation and optimisation is

reducing costs

Fuel card

• 50% of our transactions are on credit card,

potential to reduce card fees

Fuel

• $7m saving year on year

• Direct access to refiners


Employee experience

Engagement survey

• Participation up significantly to 84% (2018:

71%)

• Actively engaged employees up to 45%

(2018: 32%)

Diversity and inclusion

• 36% of Signature senior graded employees

are female (2018: 25%)

Training

• Manager Training programme refreshed

Leadership conference

• Second consecutive year

20

Our Managers in Training



Customer experience

New customer experience approach

• Hired team from hospitality industry

• SMG appointed as new customer experience

partner

Signet 2.0 – Right first time, every time

• Easier to do business

• Plane side mobile devices to be rolled out

Facilities

• $64m of investment in 2019

• 8 facilities in the US upgraded or refreshed in

the year

21

Deliver a personalised experience, right, the first time and every time

New podiums at San Francisco


Environmental and Social

Ground Equipment

• Testing for expansion of sustainable bio-

diesel fuel in Ground Service Equipment

• Electrification

Solar

• Net seller of clean energy to the grid from

seven locations in US

• A further 30 locations under review for the

next two years

Accreditations

• New LEED build projects at Atlanta and

Bedford (to be silver certified)

• FTSE4 Good

• MSCI

22

Solar panels at Bradley

Recognised as environmentally and socially responsible leaders in our communities


Environmental and Social

Sustainable Aviation Fuel (SAF)

• As market leader in B&GA we are working to

improve availability

• Working with OEMs

• Plan to have supplies readily available at

some US locations (and EMEA) by end of

this year

• Demand is high, supply remains the

challenge in the market today

Hybrid/electric

• Uber Elevate

23

Recognised as environmentally and socially responsible leaders in our communities


Signature Strategic Flight Plan

24

Growth

Operational efficiency and

process improvement

Environmentaland social

Customer experience

Employee experience

Value creation




Deliver apersonalised experience right,the first time and every time

Recognised as environmentallyand sociallyresponsibleleaders in our communities

25

Signature Aviation

• US B&GA is a long term structural growth market correlated with GDP through cycle

• Signature’s network is ideally placed for us to add non-fuel revenues to outperform the market growth

• This cash generation allows us to continue to invest in growth

through fortifying our network, our customer offering, our people and

our sustainable initiatives

• We are a highly cash generative business, Signature generated

underlying free cash flows of over $200m in 2019

26

Group outlook

1

2

3

4

Signature expected to deliver outperformance in a flat market in 2020

Our clear capital allocation policy allows for potential shareholder returns over and above our progressive dividend policy

Signature continues to be a strongly cash generative business

Focus on non-fuel revenue growth

across our controlled real estate network


2019 Final Results

Questions


Appendix2019 Final Results


2,127.6

(9.6)(71.8) (4.7)

2,041.5

235.5 18.8

(30.8) (4.5)

2,260.5

2018 FX Fuel Disposals 2018 Like for Like


Signature FBO EPIC/TECHNICAir IFRS 16 2019

Signature 2019 revenue bridge

29

Note 1: Underlying operating profit (pre exceptional and other items)


Signature H1 bridges

30

926.3

(6.6) (10.7)

909.0

230.2 8.6

(5.3) (2.1)

1,140.4

2018H1

FX Fuel 2018 Likefor Like


SignatureFBO

EPIC/TECHNICAir

IFRS 16 2019H1

163.7

(0.9) -

162.8 2.9

(3.3) (2.4)

20.3 180.3

2018H1

FX Fuel 2018 Likefor Like


SignatureFBO

EPIC/TECHNICAir

IFRS 16 2019H1

H1 operating profit ($m)

H1 revenue ($m)


Signature H2 bridges

31

1,201.3

(3.0) (61.1) (4.7)

1,132.5 5.3 10.2

(25.5) (2.4)1,120.1

2018H2

FX Fuel Disposals 2018 Likefor Like


SignatureFBO

EPIC/TECHNICAir

IFRS 16 2019H2

156.9

(0.5) - (1.0)

155.4 1.0

(0.3)

1.3

23.3 180.7

2018H2

FX Fuel Disposals 2018 Likefor Like


SignatureFBO

EPIC/TECHNICAir

IFRS 16 2019H2

H2 operating profit ($m)

H2 revenue ($m)


Business jet operations volatility

32

-6

-4

-2

0

2

4

6

8

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN

Year ove

r year change in

Busin

ess

Jet ops (%

)

2019

Source: FAA.

2020


Signature flight path

33

Organic Growth

Core revenue source optimisation

Non-fuel revenue growth

New services and asset utilisation

1

2

3

4

Pricing optimisation

Credit card Uber Elevate

Drop through >50% >50% >50%

Advertising

(1-2 yrs)

(2-4 yrs)

(2-5 yrs)

Underlying operating profit ($M) ~10 7-14 5-10

Elite


Discontinued Ontic – 10 months

• Bridge shows 2019 numbers for the ten

months pre sale to CVC against the same

ten months in 2018

• Firstmark acquisition and new licences

contributed $37.1m of revenue for 10

months

• Operating profit includes $15.0m

contribution from Firstmark and new Ontic

licences

• Support costs are being paid for by CVC

for the duration of the TSA

34

Note 1: Underlying operating profit pre exceptional and other items

Ontic Revenue Bridge ($m)

Ontic Operating Profit1 ($m)

216.0

(3.2)

(50.7)162.1

37.1 19.4 -

218.6

2018 FX Nov/Dec2018

10 monthLike for

Like

Acquisitions Organic IFRS 16 2019

62.9

(1.2)

(21.6)

40.1

15.0 11.7 0.7

67.5

2018 FX Nov/Dec2018

10 monthLike for

Like

Acquisitions Organic IFRS 16 2019


• Underlying operating profit $52.8m,

including IFRS 16 impact

• Includes $10.9m benefit from suspension of

depreciation and amortisation (2018: $5.2m)

• Excludes the $11.4m of support costs for

ERO (2018: $10.7m)

Discontinued ERO

35

Revenue Bridge ($m)

Operating Profit1 ($m)

Reconciliation of pre and post discontinued

operations reporting

Note 1: Underlying operating profit pre exceptional and other items

533.6

(3.6)

530.0

(6.1)31.4

(17.0)

538.3

2018 FX 2018 Like forLike

EngineTrading

Organic IFRS 16 2019

35.0

(0.5)

34.5

(3.4) 3.7 5.7

12.3

52.8

2018 FX 2018 Like forLike

EngineTrading

Organic Depreciationstop

IFRS 16 2019

Operating profit1

($m) 2019 2018

ERO pre discontinued ops 18.2 18.4

IFRS 16 impact 12.3 -

Add back: Middle East loss - 0.7

Add back: support costs 11.4 10.7

Add back: depreciation & amortisation

suspension

10.9 5.2

ERO discontinued ops 52.8 35.0


Cash flow

($m)Signature Aviation Ontic ERO 2019 2018

Underlying EBITDA1

348.7 71.3 40.6 460.6 456.4

Working capital movement

(41.2) (31.7) 2.6 (70.3) (26.2)

Capex (66.3) (3.0) (10.2) (79.5) (91.9)

Net Interest paid (65.2) 0.2 (2.1) (67.1) (58.3)

Tax paid (41.4) (0.1) (0.2) (41.7) (27.1)

Exceptional (13.7) (0.1) (2.6) (16.4) (19.5)

All other movements 8.2 (3.1) (3.5) 1.6 (8.6)

Free cash flow 129.1 33.5 24.6 187.2 224.8

Distributable free cash flow (ex fuel supply one off & exceptionals)

212.0 33.6 27.2 272.8 244.3

Signature

• Highly cash generative business ($212m

ex fuel RFP and exceptionals)

• Flexible capex deployment

• Longer term financing in place to better

match long lease terms

• Over 2x headroom on EBITDA covenant

• Cash tax rate remains low at 14%

Ontic

• Free cash flow funded licence investment

ERO

• Marginal recovery of prior year working

capital outflow

Signature – the real cash flow driver

36

Note 1: Underlying operating profit before depreciation and amortisation on a pre IFRS 16 basis


Depreciation and Amortisation 2019

37

Extract from cash flow

2019

Operating profit 204.9

Operating profit from discontinued operations 107.8

Share of profit from associates and joint ventures (4.2)

Profit from operations 308.5

Depreciation of property, plant and equipment 67.8

Depreciation of right of use assets 89.7

Amortisation of intangible assets 95.3

Total

Underlying Exceptional Statutory

OP 441.1 (128.4) 312.7

Depreciation 67.8 - 67.8

IFRS 16 depreciation

89.7 - 89.7

Amortisation 9.0 86.3 95.3

EBITDA 607.6 (42.1) 565.5

Discontinued


OP 120.3 (12.5) 107.8

Depreciation1 1.1 - 1.1


0.8 - 0.8

Amortisation1 3.4 12.5 15.9

EBITDA 125.6 - 125.6

Continuing


OP 320.8 (115.9) 204.9

Depreciation 66.7 - 66.7


88.9 - 88.9

Amortisation 5.6 73.8 79.4

EBITDA 482.0 (42.1) 439.9

Note 1: Ontic D&A suspended from August 2019. ERO D&A suspended for the full year.


Disclaimer2019 Final Results

This presentation contains forward-looking statements including, without limitation, statements relating to: future demand andmarkets 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 uncertaintiesbecause they relate to events and depend on circumstances that will or may occur in the future. Accordingly, actual results may differmaterially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changesin interest and exchange rates, in tax rates or tax legislation, commodity prices and other economic conditions; negotiations withcustomers relating to renewal of contracts and future volumes and prices; events affecting international security, including globalhealth issues and terrorism; changes in regulatory environment; the introduction or variation of tariffs or duties; and the outcome oflitigation. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result ofnew information, future events or otherwise.

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