Ian El-Mokadem, chief executive of Exova, admits that the Edinburgh-based group is never going to be a household name, but says most people will have come across a product or service it has tested for safety.
The materials testing specialist, which floated on the London Stock Exchange three years ago, employs about 4,200 people around the world and counts the likes of aircraft group Embraer, train maker Hitachi Rail Europe and London Underground among its clients.
“We’re not a consumer brand, and the average person in the street is not going to have heard of Exova, but we just quietly focus on trying to do a good job,” says El-Mokadem, who has been in the top job for six years, having previously been in charge of UK and Ireland operations at catering giant Compass, following a stint at Scottish Gas owner Centrica.
But he adds: “Chance are, many people will have experienced a product or service that we had a hand in testing and making sure it was safe and met regulatory requirements. Whether it’s tall buildings in the Middle East or planes or trains or making sure the air is a bit cleaner, we’re sitting behind a lot of those things.”
Speaking to The Scotsman after Exova reported a 7.7 per cent rise in annual profits, El-Mokadem says the group has reduced its global oil and gas staffing levels by about 20 per cent, or almost 200 people, in response to tough conditions across the industry, but had “hardly touched” employee numbers in Scotland.
Many people will have experienced a product or service that we had a hand in testingIan El-Mokadem
Exova’s workforce north of the Border, including at its oil and gas laboratories in Aberdeen and Edinburgh, stands at just over 200, largely unchanged from a year ago, although that total headcount number excludes a pharmaceuticals testing lab in Edinburgh and a water facility in Hillington, Glasgow, which together employed 36 people. The sites were sold last year to Luxembourg-based Eurofins Scientific as part of an £18 million deal.
El-Mokadem, a qualified Royal Yachting Association Yachtmaster who holds a degree in economics and statistics from University College London and an MBA from INSEAD, says: “If you look at the last two years you see one problem – oil and gas – but actually all of the other businesses are doing really well.
“Our oil and gas and industrials segment today is just under 20 per cent of the group, and within that oil and gas is about 9 per cent, down from about 17 per cent at the time of our initial public offering. Whilst we have been reducing headcount in that space, we’re tried to balance that by retaining our key people and expertise, because technical talent is our business.”
Announcing its annual results, which showed a 10.8 per cent rise in revenues to £328.6m, on adjusted pre-tax profits of £43.5m, Exova told investors that “forward visibility remains poor” in the oil and gas arena, prompting it to close a laboratory in Malaysia and cut jobs in Singapore, but it hailed a “strong” performance across areas including aerospace, building certification and health sciences.
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.
“That’s mainly because the other bits of the group have been growing really well while oil and gas has been going backwards,” El-Mokadem says. “Plus we’ve been doing acquisitions to increase the mix and enjoying record organic growth.”
He adds that Exova, which is chaired by former Wood Group chairman and chief executive Allister Langlands, “is in a very good place” and is eyeing further acquisitions following a string of recent deals, including the £15.5m purchase in July of Jones Environmental Forensics, a Welsh business that specialises in testing contaminated water and soil and December’s £7.6m takeover of Yorkshire-based Insight NDT.
“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.”
Analysts at Shore Capital, which has a “buy” rating on Exova’s shares, described the results as “solid”, pointing to an acceleration in performance at the group’s aerospace business, and said underlying margins of 15.3 per cent came in ahead of the broker’s forecast.
With 135 laboratories and offices in 33 countries, El-Mokadem says the group is “a Scottish success story and probably doing more acquisitions globally than any other Scottish business I can think of”.