Black Country engineering group Hampson Industries has reported a 50 per cent rise in full year adjusted pre-tax profits resulting from buoyant demand in its key aerospace and automotive markets.
The Brierley Hill firm said that despite current pessimism surrounding the aerospace industry due to the high cost of oil, it still expected demand in its core markets to remain strong for the foreseeable future.
Hampson said pre-tax profits for the year to March 31 on continuing operations before restructuring charges and other items, rose to £17 million compared with £11.3 million last year. This on a 14 per cent rise in revenue to £157.9 million. The group increased its total dividend to 2p per share from 0.9p.
Finance director Howard Kimberley said: “We have been able to continue the trend of growth with higher volumes and we have been able to secure margin gains.
“The level of cash generation is also significant while we have also been able to reduce our net debt levels by nine per cent.”
The high level of gearing as a result of the 2002 aerospace recession has diminished, while the firm has also been able to produce a surplus in its pension scheme.
New chairman Chris Geoghegan said he was pleased to be able to report the strong growth in earnings.
“Demand conditions in our core markets are buoyant and are expected to remain so for the foreseeable future,” he added.
The engineer said all its aerospace businesses had generated improved results during 2007/08, despite the effects of a weaker dollar.
It said global aerospace markets remain buoyant, with a record quarterly order intake level for Boeing and Airbus in the three months to March 31.
Order backlog levels for both aircraft and jet engine manufacturers currently remain at very high levels and the group continues to expect production levels to rise in 2008/9.
The first of Boeing’s new 787 Dreamliners is expected at the end of the year, while Hampson is also preparing for new tooling for the Airbus A350.
The company acquired two US tool manufacturers in a £158.2 million deal at the beginning of last month and the group expects the acquisition to be completed on Monday.
Odyssey Industries and Global Tooling Systems, based in Michigan, are leading suppliers of large, close tolerance tooling systems and services for the commercial and military aerospace industries.
They generated business in excess of £70 million last year and due to high demand within the sector, Hampson said growth predictions of 15 per cent were justified.
Hampson expects the acquisitions to transform its business and give it global leadership positions in three sectors. Two of those are in its core aerospace markets, including the manufacture of laminated and solid shims – parts used to fill spaces/gaps in aircraft production – and the design and manufacture of large, close-tolerance tooling systems, which Hampson said were critical in producing the latest generation of lighter, fuel efficient, carbon composite-rich aircraft such as Boeing’s 787 and the Airbus A350XWB.
As airlines move to upgrade their fleets to these new generation of aircraft, so Hampson is hopeful of new business as a result.
Meanwhile, the massive expansion of the aviation sector in Asia also providing new opportunities.
Elsewhere, the group said its UK automotive turbocharger business was also performing well, having secured two major contracts to supply high precision shaft and wheel assemblies to ‘premium sector’ customers – one an unnamed German manufacturer.
These generated an aggregate £19 million and the firm said that in view of developments taking place within the industry, demand for its products was likely to stay high and make a major contribution to growth going forward.
Its Indian automotive operation is also progressing well after initially struggling with volumes and the company said it was hopeful of continued growth for this business in the year ahead.
In reaction, Numis Securities said the results were strong and ahead of consensus with all three
divisions showing good organic growth.
“The market outlook is positive, particularly with Hampson’s considerably strengthened position in the growth area of composite aero structures following the acquisition of Odyssey and GTS,” it said it a statement.
It maintained the view that aircraft build rates would continue to rise over the next three years supported by the record industry backlog and airlines’ desire for new fuel efficient aircraft.