PERFORMANCE
FOR THE FIRST TIME REVENUE HAS EXCEEDED £250 MILLION, A GROWTH RATE OF 62% FOR THE YEAR AND OVER THE LAST THREE YEARS, A COMPOUND AVERAGE OF 35%. AT OVER £47 MILLION, TRADING PROFIT HAS MORE THAN DOUBLED IN THE YEAR ENDED 31 MARCH 2009.
REVENUE UP BY 62%
RECORD RESULTS & STRATEGIC REPOSITIONING
Against a backdrop of global economic uncertainty, Hampson has continued to make excellent overall progress in 2008/09.
We have delivered another set of record results, and more importantly have repositioned the Group into an attractive niche where we are global leaders and where long-term growth is anticipated, driven by increasing use of composite materials in both commercial and military aerospace.
Our revenue has, for the first time, exceeded £250 million, a growth rate of 62% for the year and over the last three years, a compound average annual rate of growth of 35%. At over £47 million, trading profit has more than doubled in the year ended 31 March 2009.
Our acquisitions of Odyssey and GTS, completed in June 2008, have performed well ahead of our expectations, and together with our existing tooling business, Coast Composites, have propelled us into being the largest aerospace precision tooling manufacturing business in the world. As a result, we now have a better balanced portfolio and more resilient business base on which to build.
In addition to our global leadership position in tooling, we are expanding further into niche, difficult-to-replicate technologies in high temperature carbon composites. These technologies are now opening the door to new sources of growth, particularly in US military aerospace, with a number of important new multi-year contracts secured during the second half of 2008/09 for composite engine components worth approximately US$17 million. With an ongoing programme to expand our manufacturing capacity and capability, we see scope for further wins in this area going forward.
AEROSPACE
The very strong overall performance in aerospace in 2008/09 was driven primarily by the contributions of Odyssey & GTS from the date of their acquisition, assisted by the relative strength of the US dollar. Aerospace Composites & Transparencies revenue as a whole increased as a result by 228% to £151 million and trading profit by 333% to just over £43 million.
The integration of Odyssey and GTS has proceeded well and best practices are now being shared across all of our tooling businesses. Capacity has been expanded at both GTS and Coast Composites, with the latter having gained significant orders for the Airbus A350 programme and having delivered the first pre-production composite wing curing tools to schedule during the period.
Aerospace Components & Structures saw a very modest decline in revenue and reduced profitability in 2008/09 after several strong years of growth. Compared with 2007/08, trading profit declined by £1.6 million (13%). This was a result mainly of the Eclipse 500 programme termination and lower volumes in our UK airframe component business following customer supply chain rationalisation which impacted the final quarter and which will impact 2009/10. Impairment provisions of approximately £21 million have been charged against the carrying value of tangible and intangible assets previously dedicated to the Eclipse 500 programme.
During the year we reorganised our aerospace businesses under a new umbrella entity and branding, Hampson Aerospace Services. This change is intended to harness together the diverse capabilities of our individual businesses for the benefit of the customers that are now seeking end-to-end, fully integrated solutions. Typically these are to supply larger structural assemblies and sub-assemblies — for example, comprising fabricated or machined metallic details as well as carbon composite and thermo-plastic parts — that deliver both cost and efficiency savings as well as support more collaborative ways of working with our customers’ engineering, procurement and operations teams. In short, Hampson Aerospace Services now offers the synergy of Hampson’s entire aerospace portfolio so that customers can simply deal with one experienced team providing an innovative, truly integrated solution to their sourcing requirement, from initial tooling requirements to fully designed components and finished assemblies.
AUTOMOTIVE
Following a much improved first half performance, our turbocharger component business suffered from a steep decline in volumes from the third quarter onwards as global automotive demand plummeted. A number of customers reduced orders substantially or took machining work back in-house to better utilise productive assets and labour resources during the year. As a result, revenues fell from £23 million to £18 million.
These factors have led us to charge impairment provisions against the carrying values of certain under-utilised assets as at 31 March 2009, amounting to approximately £7 million.
Despite rapid action to adjust the cost base through a number of measures, the Automotive Turbocharger business remains loss-making at current activity levels and is likely to see an operating loss of the order of £3 million in 2009/10 before any further management action. With no significant improvement in demand in immediate prospect, the Board is currently reviewing options to mitigate the economic impact on the Group, which include further rationalisation, divestment or closure.
PEOPLE
The successes we have achieved in the year are due to the collective and unstinting efforts of our people, spread across three continents. It is our people that set us apart and I would like once again to thank each and every one of them for their immense personal contribution and commitment to helping us achieve our objectives.
Despite the unfortunate need for headcount reductions in some of our businesses during the year, we remain committed to fostering new talent and entrepreneurship by investing in training to improve the knowledge base and vocational skills of our key employees and to provide new opportunities for their continued development.
INDEBTEDNESS
Cash continues to be managed very tightly as a key operational priority and our principal bank facilities are committed until April 2013. Net debt at 31 March 2009 was slightly better than expected at £145.4 million, compared with committed borrowing facilities, excluding undrawn leasing, of £206.9 million. Net debt/EBITDA on a bank measurement basis was 2.56 times, compared with a maximum covenanted level of 3.50 times at 31 March 2009. EBITA/net interest on a bank measurement basis was 5.34 times, compared with a minimum covenanted level of 3.50 times at 31 March 2009.
MARKETS
We expect military aerospace demand to remain stable overall during the next two years.
In commercial aerospace, we expect to see some reduction in production rates by Airbus and Boeing later in the year as new orders continue to fall and many airlines continue to defer or cancel previously scheduled deliveries.
Demand for regional, business and general aviation programmes has already seen significant reduction with some programmes likely to see further downward movement in the year ahead.
Visibility is limited in the global automotive industry and it is difficult to predict when to expect substantive recovery in this sector.
OUTLOOK
The prospect for tooling, which represents over half of the Group’s business going forward, remains one of attractive growth over the long term. This is due primarily to the use of new materials and significant technological changes in commercial and military aircraft design and manufacture compared to previous generations. The large primary carbon composite structures from which these new generation aircraft and their derivative versions will be assembled (i.e. wing, nose, fuselage and tail) will require a significant amount of high value tooling to produce, and with our investments for increased capacity and our global leadership position, we are ideally placed to capitalise on this demand as and when orders are placed.
Delays in releasing orders on several new aircraft programmes are likely to impact tooling sales during the first quarter of 2009/10. However, near-term requirements indicated by our customers for the A350, B787 and F-35 programmes which are presently in the quotation stage, suggest the tooling outlook for the year as a whole will be resilient.
Aerospace Components & Structures, which generated 34% of total revenue this year, is expected to see lower revenue based on reduced volumes in the year ahead.
If sterling were to remain at current levels, there would be a further translational foreign exchange benefit to the Group’s results in the coming financial year.
Whilst it is clear that 2009/10 will be a challenging year for the Group, we face it as a much better balanced business with stronger positions in markets with long-term growth prospects.
We will continue to act decisively and swiftly to protect the interests of our Shareholders wherever necessary and ensure we are positioned to continue to grow as soon as market conditions allow.
KIM WARD
CHIEF EXECUTIVE
3 JUNE 2009
PERFORMANCE
THE PROSPECT FOR TOOLING, WHICH REPRESENTS OVER HALF OF THE GROUP’S BUSINESS GOING FORWARD, REMAINS ONE OF ATTRACTIVE GROWTH OVER THE LONG TERM.