Exova losses widen amid aerospace turbulence

Ian El'Mokadem admitted firm had faced 'some headwinds'
Ian El'Mokadem admitted firm had faced 'some headwinds'
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MATERIALS testing group Exova lost more than a tenth of its value yesterday after maiden results showed it fell deeper into the red amid subdued demand in the European aerospace market.

However, the Edinburgh-based firm, which floated in April, insisted its medium-term prospects were “positive” following a string of contract wins.

The company, based at Lochend Industrial Estate in Newbridge, boasts Boeing, Ford and US space agency Nasa among its clients and generates about 75 per cent of sales outside the UK.

Chief executive Ian El-Mokadem said: “The group has made satisfactory progress in the first six months of 2014. We have seen good performance in the Europe and rest of world regions, however we have faced some headwinds in aerospace and Americas transportation.”

Results published yesterday revealed a statutory pre-tax loss of £38.1 million for the six months to the end of June, compared with £10.3m a year earlier.

Revenues dropped 2.7 per cent to £134.7m as the strength of the pound exacerbated a fall in sales in the Americas and offset growth elsewhere. The pound rose more than 3.3 per cent against the dollar during the first half, making foreign exchange drag a common theme for British firms.

Exova said: “In the Americas product cluster, which serves the transportation sector, we had unusually high levels of sales with one of our clients in 2013. As expected, this level of activity has not repeated in 2014 resulting in a significant reduction in both sales and margin in this cluster in the first six months of 2014. This will continue to be the case in the second half.

“We are also seeing a general weakness in demand for certain types of testing for the transportation sector.”

Exova, which employs about 3,800 people across 118 facilities in 23 countries, was formed in 2008 when private equity firm Clayton Dubilier & Rice (CD&R) bought the testing division of specialist engineering group Bodycote for £417m.

Its initial public offering (IPO) in April was the first by a Scottish company on London’s main market since Energy Assets, the Livingston-based gas meter supplier, listed in March 2012.

The float of a 40 per cent stake in the business raised about £110m for selling shareholders, including senior management and CD&R, with a further £110m going to the company to help reduce its debt pile, which has decreased to £139.9m, from £219.9m at the end of 2013.

Exova priced its shares at 220p in the initial public offering, valuing it at £550m, but they ended yesterday’s session down 22p, or 10.2 per cent, at 193p.

El-Mokadem said: “The medium-term outlook remains strong.”