BAS: more than the name would suggest
The Bermuda Stock Exchange last month launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island's public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX. In the third of the series, Jonathan Kent looks at Bermuda Aviation Services.
Bermuda Aviation Services Ltd is living proof that you should not read too much into a name.
The company was incorporated in 1947 under an Act of Parliament bearing the firm's name. It originally provided aviation-related services to the LF Wade International Airport, including passenger handling, weather updates and flight plans, and was authorised to act as an agent for the airlines serving Bermuda.
But over the seven decades since, BAS has evolved into something completely different, a group of companies offering broad-ranging expertise from air conditioning and energy efficiency to elevator servicing and auto repairs.
On its website (www.bas.bm), BAS makes this bold claim: “The wide range of skills and depth of knowledge within the group of companies enables BAS to solve any challenge that a business might face.”
BAS could stake a claim to having the broadest corporate skill-set of any domestic company listed on the Bermuda Stock Exchange.
The group includes:
• CCS Group — infrastructure cabling, cloud services and enterprise networking.
• Besco — energy management systems, fire detection and security systems, mechanical, electrical and plumbing engineering.
• Integrated Technology Solutions — audiovisual solutions, window treatment, digital signage.
• EffTech — heating, ventilation and air-conditioning solutions and maintenance; fire and safety systems.
• Otis Bermuda — elevator supply, maintenance and retrofits; escalators and moving walkways.
• BAS-Serco — facilities management and commercial cleaning.
• Weir Enterprises — automotive servicing and diagnostics; industrial and commercial radiator repair.
BAS-Serco lost the airport contract in March 2016 and BAS has also sold International Bonded Couriers but the company has expressed confidence that growth across its operating subsidiaries will replace the revenue lost.
CCS has broadened its horizons by setting up a European operation in Portugal, opening the door to a much larger market. The office in Lisbon opened in 2015.
Much of BAS's transformation into a multifaceted services provider has happened within recent years, during which time BAS acquired Besco and ITS and founded Eff-Tech.
A joint statement from chief executive officer Ian Cook and chairman David Pugh in the 2016 annual report makes clear the company's rationale: “Over the last ten years, the diversification of businesses within the group's subsidiary companies has allowed the group to dampen the effects of the reliance on the aviation industry ... Continued diversification, creation of synergies and restructuring has allowed the group to remain stable as the effects of a stagnant economy prove to be a challenge.”
This transitional decade involving a shift away from the company's traditional business may have been one of the drags on the company's share price in recent years. BAS was at $3 yesterday, having nearly halved from the $5.90 level it was at the start of 2010.
In its last full year, ended March 2016, the company recorded net income of $2.8 million. And for the six months ended September 30 last year, it generated a further $689,000 in earnings. The company has been profitable for four consecutive years, but posted a loss of $4.5 million in 2012.
This loss was largely as a result of a $5.7 million goodwill writedown — a reduction in the carrying value of a cargo-handling operation — and discontinuation of major operating segments at Aircraft Services Bermuda Ltd.
Quarterly dividend payouts have been at a consistent 5 cents per share — representing a substantial yield of 6.7 per cent at the current share price — since August 2010. Full-year revenue of $39.5 million in fiscal 2016 is little changed from the $40.1 million BAS took in for 2012, although it is well down from its $56.2 million peak in 2014.
One legacy risk issue that BAS has removed in recent years was the firm's defined-benefit pension plan, which was wound up in 2014, when the last of the settlement payments were made.
Transformation of the kind that BAS has gone through is always a challenging process in business, and the great reorganisation of the past decade is not over. “During the upcoming fiscal year, the group expects continued change and reorganisation as it adapts to its changing business environment,” Mr Cook and Mr Pugh said in the 2016 annual report.
“Centralisation and consolidation of financial, administrative and operational services will continue to occur as the group strives to achieve efficiencies that will allow it to remain competitive and innovative.”
However, the group appears to be quietly confident that the major upheavals are now done and investors can look forward to a more stable period.
“Despite these significant changes, your board and management remain confident that the group has now placed the vast majority of its legacy issues firmly in the past and look forward to more ‘normal' times,” Mr Cook and Mr Pugh added.
Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Past performance is no guarantee of future results