Exova profits rise despite tough oil and gas market

Edinburgh-based Exova employs about 4,200 people around the world. Picture: Contributed
Edinburgh-based Exova employs about 4,200 people around the world. Picture: Contributed
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Materials testing specialist Exova today reported a rise in annual profits but said conditions in the oil and gas sector have continued to weaken.

The Edinburgh-based firm, which employs about 4,200 people around the world, said adjusted pre-tax profits for 2016 grew 7.7 per cent to £43.5 million, on revenues 10.8 per cent higher at £328.6m.

READ MORE: Exova to sell two Scottish labs in £18m Eurofins deal

It hailed a “strong” performance across areas including aerospace, building certification and health sciences, but told investors that “forward visibility remains poor” in the oil and gas arena, prompting it to close a laboratory in Malaysia and reduce headcount in Singapore.

Chief executive Ian El-Mokadem told The Scotsman that the group has reduced its global oil and gas staffing levels by about 20 per cent, or almost 200 people, but had “hardly touched” the numbers in Scotland.

He said that Exova’s workforce north of the Border, including at its oil and gas laboratories in Aberdeen and Edinburgh, had remained broadly stable at just over 200.

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That total headcount number excludes a pharmaceuticals testing lab in Edinburgh and a water testing facility in Hillington, Glasgow, which together employed 36 people and were sold last year to Luxembourg-based Eurofins Scientific as part of an £18m deal.

El-Mokadem added that today’s results were in line with expectations, “demonstrating the strength of our diversified portfolio and our ability to respond to changing market conditions”.

“Overall growth was strong with broad-based organic growth across the portfolio, with the exception of our oil and gas and industrials sector. The portfolio has been strengthened by the recent acquisitions and disposals, and with extensive cost actions taken to mitigate the poor trading conditions in oil and gas, we continue to make good progress towards our medium-term objectives.”

He said that Exova, which floated in 2014, “is in a very good place” and was eyeing further acquisitions following a string of recent deals, including the purchase in July of Jones Environmental Forensics, a Welsh business that specialises in testing contaminated water and soil.

“We see plenty of opportunities to strengthen our position in a number of markets by further well-executed acquisitions. We turn away more than we do, because we’re very focused on the management fit – when you misjudge that, things tend to go wrong.”

On a statutory basis, pre-tax profits for the year to the end of December jumped 57.8 per cent to £36.6m, and shareholders are in line for a 6.3 per cent increase in their total dividend to 3.4p a share.

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