BLACK Country aerospace group Hampson Industries has warned full year profits are unlikely to meet expectations as a result of a slow recovery in its key markets.
The warning had a dramatic impact among investors and shares plummeted by more than 55% in early trading this morning.
In a statement, the Brierley Hill-based business said first half trading profit was expected to be around £6m and pre-tax profits for the year were likely to be “materially below current market estimates”.
The company said in June that the overall rate of recovery during the first two months of the new financial year had been slower than anticipated, particularly in its Odyssey tooling business. It said then that it remained cautious about the group’s full year expectations and especially, its first half performance.
Since then, it said conditions had barely improved with orders during June and July being lower than expected.
In its Aerospace Composites & Transparencies operation it said its tooling, Coast Composites and GTS businesses had all seen strong improvements compared with the equivalent period in 2009/10 – largely driven by increased activity on the A350 and Joint Strike Fighter (“JSF”) programmes.
However, order intake has remained very low at the group’s largest facility, Odyssey. Delays in the receipt of engineering data from certain customers have slowed activity levels with a knock-on effect for operation efficiencies.
“In light of these issues, further significant cost reductions have been initiated together with improvement actions,” it said in an interim management statement covering the period April 1 to date.
Hampson said it hoped the measures would bring benefits during the second half of the year.
On a brighter note, this month saw the group awarded a new tooling contract worth $10m (£6m) from Boeing – the largest in the year to date – which is expected to be partially completed in the current financial year.
It said talks were also taking place with both Boeing and other manufacturers about further orders.
Despite this, it said Odyssey had been loss-making in the period to date and would continue to be so until orders picked up and efficiencies kicked in.
The group’s composite component businesses, Texstars and CHI, have seen delays in orders by customers for some military programmes which are now expected in the second half of the financial year. In particular, it said the JSF programme was now starting to gain greater momentum which would benefit sales of composite engine components from the end of the first half onwards.
In Aerospace Components and Structures, it said a planned restructuring was progressing and this was likely to reduce costs during the second half onwards.
In outlook, it said that although the overall rate of recovery in the group’s tooling operations has been slower than expected, both the tooling order book and the pipeline of potential new work remained strong.
“Based on current discussions with customers, the board envisages that the rate of conversion from quotation to new orders will accelerate in the near term, which, together with management actions in hand, will lead to improved results in the second half.
“However, in light of the slower than anticipated start to the year, the board now expects first half trading profit to be approximately £6m and therefore also expects profit before taxation for the year as a whole to fall materially below current market estimates.”
Net debt at July 31 was approximately £99m, an increase of approximately £17m since last year. It said the increase reflected usual seasonal phasing of working capital.
It said it also continued to benefit from strong banking relationships with committed borrowing facilities with a weighted average term to maturity of 3.3 years.
The period also saw the disposal of the loss-making Automotive Turbocharger business a net cash consideration of £2.5m. However, the move it set to cost the company around £9m.
Former chief executive Kim Ward left the company at the end of July and he will be succeeded by Norman Jordan, who joins Hampson at the beginning of next month having previously held senior positions in several international aerospace businesses, including latterly as chairman and chief executive of Toulouse-based Labinal.
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