Date of notification: 1 April 2019
BBA Aviation plc (the "Company")
Annual Financial Report and Notice of AGM
Further to the release of the Company's Final Results announcement on 5 March 2019, the Company announces that it has today published its Annual Financial Report 2018 ("Annual Report 2018").
The Company also announces that it has today posted to shareholders notice of an Annual General Meeting to be held at 10.30am on Friday 10 May 2019 at the Royal Aeronautical Society, No. 4 Hamilton Place, London W1J 7BQ.
The Annual Report 2018 can be viewed at or downloaded from the Company's website at:
http://www.bbaaviation.com/investors
The Notice of Annual General Meeting 2019 can be viewed at or downloaded from the Company's website at: http://www.bbaaviation.com/investors/board-and-corporate-governance/agm
Copies of the documents listed below have also been submitted to the National Storage Mechanism located at www.morningstar.co.uk/UK/NSM:
· Annual Report 2018
· Chairman's Letter and Notice of Annual General Meeting
· Notice of Availability of BBA Aviation plc Annual Report 2018 and Notice of Annual General Meeting
At the Annual General Meeting due to be held on 10 May 2019 it is proposed that the Company seek, inter alia, general authority from ordinary shareholders for the Company to make market purchases of up to 14.99 per cent of the Company's existing issued ordinary share capital. This renews the authority granted by shareholders at the Annual General Meeting held on 11 May 2018. Any ordinary shares purchased under the authority may be cancelled or held in treasury.
The Company's Final Results announcement released on 5 March 2019 contained the responsibility statement of the directors on the Annual Report 2018 and details of significant events occurring during the period. For the purposes of compliance with DTR 6.3.5 set out below is the statement of principal risks and uncertainties which is set out in the Annual Report 2018 and the text of note 27 to the consolidated financial statements in the Annual Report 2018 concerning related party transactions.
"Risk management
We are committed to effective risk management to support delivery of our strategic objectives.
How we manage risk across BBA Aviation
Our risk management process is designed to improve the likelihood of delivering our business objectives, protect the interests of our shareholders and key stakeholders, and enhance the quality of our decision making through the awareness of risk-assessed outcomes. It also assists in the safeguarding of our assets, including people, finances, property and reputation. We are committed to conducting business in accordance with all applicable laws and regulations and in a manner that is consistent with our values.
BBA Aviation's risk appetite and risk mitigation strategy are matters that are overseen by the Board, with the support of the Audit and Risk Committee, which manages the processes that underpin risk assessment and our systems of internal control.
The risk assessment process drives the Internal Audit scope, which is agreed in February each year by the Audit and Risk Committee. The Chief Risk Officer and Head of Internal Audit attend Audit and Risk Committee meetings to provide regular updates and discuss any proposed changes to the plan.
The Board has established a framework for assessing risk in the context of likelihood and impact in financial and reputational terms. Each risk within the Group is assessed against this framework and the Board reassesses its risk appetite on a bi-annual basis when the Group risk map is presented to the Audit and Risk Committee.
Group policies, standards and internal controls, together with our values and our focus on safety, underpin our approach to risk management. We are committed to being a responsible values-led business and our leaders are responsible for embedding this into BBA Aviation's culture, our decision making and how we work.
Our employees are accountable for working to established standards and for identifying and escalating encountered risks so that they can be appropriately managed. The Group has comprehensive training programmes to ensure that employees are appropriately trained in BBA Aviation's ethics policies.
The bi-annual risk assessment process looks forward three years to create BBA Aviation's risk profile. These key Group-level risks are input into the scenario modelling for the Viability Statement, which is explained further on page 49 [of the Annual Report].
Progress in 2018
We continue to evolve our risk management process to provide practical insight into risks the business is facing. The risk registers have been extended to:
· Identify risk velocity - the speed at which a risk may impact us;
· Collect emerging risk five and ten years out, which will be a key input to our strategic planning process.
We have also improved the rigour in our data collection and analysis to support the impact evaluation of our key risks. This information is input to the scenario modelling that underpins the Viability Statement (see page 49 [of the Annual Report]).
Cyber and data breach risk
We have completed a phase of work on cyber risk including an assessment of likely business threats, data protection and information security controls. The cyber case study below explains how our businesses are working together with IT and our corporate functions to manage cyber risk.
A Data Privacy Lead reporting to the Group General Counsel will be appointed in 2019 to address our increasing compliance obligations arising from data privacy regulations in the EU and worldwide.
Business continuity
We have undertaken business continuity and crisis management exercises at two of our major Signature FBO locations - Luton, UK and Teterboro, USA - and simulated how we would react to a potential data leak to a competitor at Ontic Chatsworth, California. See page 32 [of the Annual Report] for more details of the Signature exercises.
Brexit
We hold a fortnightly call with representatives from our businesses and our tax and legal teams.
Any risk that we face concerns any changes to the open skies arrangement that may impact B&GA travel, and a slow-down in customs processes that may lead to delays in the cross-border flow of fuel, materials and engines, both for BBA Aviation, our suppliers and their upstream supply chains, and customers shipping engines to ERO for repair and overhaul. Having considered these risks and in the context of the Group's flight operations and supply chains being largely outside Europe, we see only limited potential risk.
Principal risks
We have identified 12 principal risks and uncertainties facing BBA Aviation which are considered by the Board to be material to the development, performance, position or future prospects of the Group. These risks, mitigations and changes during the year are summarised in the table below. They are not set out in priority order. Supply chain disruption has been added to the list in 2018 and managing key resources across major projects removed.
Change during the year
Increasing ↑
Stable ↔
Declining ↓
| Risk | Description and potential impact | Mitigation action/Control | Link to business model and strategy |
| Economy ↑ | Structural changes in the global economic environment, or cycle fluctuations that drive down B&GA and commercial flying, and military expenditure. | Active monitoring of lead economic indicators. Strong financial controls to monitor financial performance and provide a basis for corrective action when required. Low fixed costs allow cost base to be flexed to meet demand. | Market-leading assets Robust and flexible operating models Drive operational efficiency and process improvement |
| Terrorist ↔
| Global terrorist events either in-flight, at or near major airports materially impacting global air travel. | Airport and internal access security processes, vetting of potential staff members in recruitment process. Low fixed costs allow cost base to be flexed to enable corrective action to be taken. | Market-leading assets Robust and flexible operating models Drive operational efficiency and process improvement |
| Legislative changes ↑
| Legislative changes causing material increase to cost of B&GA flight relative to alternatives such as commercial flying, road or rail travel. In 2018, the major change has been the introduction of General Data Protection Regulation (GDPR). | Active participation in all relevant industry bodies. Ongoing monitoring of all US and EMEA political activity which may impact B&GA activity. Internal policies including Data Protection and supporting training ensure GDPR requirements are understood. | Market intelligence Robust and flexible operating models Drive operational efficiency and process improvement |
| Competitor activity ↔
| Ongoing competitor activity to replicate market position of Signature network. | Active monitoring of competitor activity. Strong financial controls to monitor financial performance. | Barriers to entry Market intelligence Customer and partner relationships Technology Fortify network and expand portfolio Improve customer experience |
| People ↔
| Ability to attract and retain high-quality and capable people at senior and mid-management levels. | Succession planning process embedded with review at Executive Management Committee and Board level annually. Remuneration structure designed to reward superior performance and promote retention. Proactive employee development and key talent retention processes. | Market-leading assets Vision, Mission and Values |
| Products ↔
| Potential liabilities from defects in services and products. | Standard operating procedures with routine root cause analysis of all incidents. Liability insurance. | Customer and partner relationships |
| Cyber ↔
| Impact of a successful cyber attack. | Operation of a specialist Information Security team. Continual refreshment of firewalls and endpoint protection, laptop encryption, mobile device management, intrusion protection, password policy, vulnerability and penetration testing, identity and security event management. Cyber insurance added to insurance programme in 2019. | Technology Drive operational efficiency and process improvement |
| Ethics ↔
| Intentional or inadvertent non-compliance with company values and legislation, both within BBA Aviation and with trading partners. | Clear values statement and ethical policies. Semi-annual compliance certification by all senior management. Rigorous third party vetting processes. Robust internal control environment and regular review by internal and external audit. | Vision, Mission and Values Governance |
| Environment ↔
| Environmental exposures. | Strong procedural controls and physical containment when working with fuel or other hazardous chemicals. Active management of known environmental matters to minimise costs to resolve. Environmental insurance where appropriate. | Vision, Mission and Values Drive operational efficiency and process improvement |
| Banking covenants ↔
| Non-compliance with banking covenants caused by a tighter regulatory environment around sanctions compliance, which is a key condition of our banking covenants. | Strong treasury management controls concerning liquidity management. Rigorous third party vetting processes, which includes compliance with sanctions regulations. | Vision, Mission and Values Governance |
| Tax ↔
| Changes in tax regulation in both the USA and EMEA could impact our effective tax rate and our cash tax liabilities. | Timely compliance with all international tax requirements. Continuous monitoring of changes to tax legislation, taking advice where appropriate from reputable professional advisers. | |
| Supply chain disruption ↑
| Delay in delivery of parts from multi-tiered supply chains operating across multiple countries | Regular business reviews with major suppliers that address horizontal supply chain issues. Mitigate single sources of supply where able or incorporate supply agreements that provide protection against loss and interruption. | Customer and partner relationships Drive operational efficiency and process improvement |
Related party transactions
Transactions between the Company 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.
Compensation of key management personnel
Key management are the directors and members of the Executive Committee. The remuneration of directors and other members of key management during the year was as follows:
| | 2018 $m | 2017 $m |
| Short-term benefits | 8.0 | 8.8 |
| Post-employment benefits | 0.7 | 0.4 |
| Share-based payments | 1.1 | 2.0 |
| | 9.8 | 11.2 |
Post-employment benefits include contributions of $0.7 million (2017: $0.4 million) in relation to defined contribution schemes.
The remuneration of directors and key executives is determined by the Remuneration Committee having regard to the performance of individuals and market trends. The directors' remuneration is disclosed in the Directors' Remuneration Report on pages 66-92 [of the Annual Report].
Other related party transactions
During the year, Group companies entered into the following transactions with related parties which are not members of the Group:
| | Sales of goods | Purchase of goods | Amounts owed by | Amounts owed to | ||||
| | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Associates | 4.3 | 14.4 | 738.8 | 610.5 | 0.6 | 2.0 | 82.1 | 64.7 |
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 $0.6 million (2017: $2.0 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 operates various pension and other post-retirement benefit schemes for its employees. Details are set out in note 19."
The financial information set out in the Company's Final Results announcement of 5 March 2019 does not constitute the Company's statutory accounts for the year ended 31 December 2018. Statutory accounts for 2018 will be delivered to the Registrar of Companies in due course.
This announcement should be read in conjunction with, and is not a substitute for, reading the full Annual Report 2018.