Hampson’s aerospace purchases land it fresh slot in FTSE listing

A succession of cash acquisitions in the sector defies gloomy predictions

Hampson Industries is becoming a convincing, albeit relatively small player in the aerospace components market, having just secured a new FTSE listing in the `aerospace and defence’ category.

The move follows a determined series of acquisitions in the sector. The Hampson Group now has ten aerospace businesses, making up nearly half of its £143m turnover and nearly 75% of the operating profit in the last full year.

The fast development in this area has been achieved by a series of cash acquisitions, stretching Hampson’s gearing to well over 100%, though the interest payments remain securely covered.

The determination with which the group has moved into this field shows a marked confidence in the sector’s prospects – in contrast to some of the downbeat predictions made at last month’s Paris Air Show.

`There are a lot of myths circulating in the industry,’ says Hampson chief executive Chris Davies. `Many people have become preoccupied with the problems at Boeing, and with the slump in demand in the Far East for planes with more than 400 seats. It is true that Boeing is peaking, and is predicting a 30%-40% decline over the next four years. People see that as the headline and then assume that companies like Hampson must suffer.’

But Hampson, like many other UK aerospace suppliers, has a trump card: Rolls-Royce is one of its customers, and Rolls-Royce is continuing to take an increasing share both within Boeing and Airbus. The number of Boeing planes with Rolls-Royce aero engines is forecast to remain constant, despite the overall decline in aircraft production forecast. Similarly, despite Airbus’s prediction that its production will stay more or less at 1999 rates for the next four years, Rolls-Royce’s business with Airbus is set to grow.

Hampson’s own product mix, with 50% of its aerospace production related to engine components, looks set to benefit from these moves. There is nothing clever about this, Davies says: `The market is so focussed, you really do have to be a mug at marketing to get this wrong.’

Other Hampson aerospace customers include British Aerospace, the BMW-Rolls-Royce joint venture for business jet engines, GKN Westland and Bombardier Aerospace.

Hampson’s prospects for further growth depend on more favourable market sentiment to boost its share price. `People have yet to recognise the huge switch we have made from general engineer to a focussed aerospace engineer,’ Davies says.

The group is already eyeing up potential further targets in the US, but is reluctant to push the gearing up further to fund this. Its metals business, which turned over £44m last year with a small £1.35m profit, looks like the only remaining part of Hampson that could be disposed of – a prospect that Davies describes as no more than `a possibility’.

The third part of the business, precision engineering, has seen a slump in operating profit of more than 20% last year. Hampson nonetheless seems reluctant to cast it aside.

Airbus’s continuing demand for Rolls-Royce Trent engines is good news for Rolls supplier Hampson

Copyright: Centaur Communications Limited