More on BBA
BBA: H1 2006 trading statement
BBA reported that trading for the half year to June 2006 was in line with expectations.
Aviation, which now accounts for more than 75% of operating profits, is expected to make “good progress” in the current the half year compared to the same period last year. The troubled Fibreweb business is expected to report substantially lower profits than the previous year.
The company said it was committed to demerging Fibreweb by the fourth quarter of 2006, a matter we have long advocated and examined in more detail in our previous piece.
Growth in the aviation business will be driven by maintenance, repairs and overhauls, where there has been a substantial improvement in profits and margins. Acquisitions made during the year will also help boost profitability and a number of small acquisitions are also planned for the second half of the year.
The company’s fortunes are tied to that of the airline industry; the principal risks to earnings come from rising fuel prices and slowing economic growth, which will dampen demand, particularly from budget airlines.
The demerger of Fibreweb will reduce variability in earnings ie reduce risk.
The main upside is that the company could be a potential target for a private equity house.
The share trades at 263.5p, on a prospective PE (2007 earnings) of 14.5x with a yield of 4.8%.
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