BBA engineers strong growth rate

BBA, the engineering group, is expecting growth to accelerate in the coming year as the benefits of heavy investment and acquisitions feed through.

Roberto Quarta, chief executive, expects BBA to report organic revenue growth of 6 per cent in 1999, compared to a rate of about 5 per cent last year. He expects the non-woven fabrics division, which supplies the material used in sanitary towels and babies' nappies, to lead the way with growth of 7 per cent. The aviation unit, which services corporate jets and small aircraft, is likely to expand by 6 per cent.

This upbeat outlook follows a year in which BBA shrugged off the Asia crisis and worldwide economic slowdown to report a 7 per cent jump in underlying pre-tax profits to pounds 165.1m. "In the light of general economic conditions it's a solid performance," said Mr Quarta.

BBA again improved its operating margins from continuing operations by almost a full point to 14.6 per cent. Operating cash flow was strong at more than pounds 200m, helping to fund a 60 per cent increase in capital spending to pounds 109.9m.

BBA is targeting expansion into new markets. On Monday it announced a pounds 31m investment to build a factory in China to supply absorbent materials for sanitary towels. The friction materials division - mainly producing brake pads - is building US share while shifting from the competitive business of supplying manufacturers to the more lucrative aftermarket.

Mr Quarta said the current year would be used to integrate acquisitions and focus on capital spending. In the past year BBA spent pounds 338m on deals, most of them bolt-on buys for the aviation division. Mr Quarta said that with borrowings at around pounds 300m BBA could comfortably afford to spend another pounds 300m on acquisitions.

The market took the results in its stride, leaving BBA shares - which have risen by more than 70 per cent in the past six months - down just 4.5p at 442p. Analysts plan to leave profit forecasts unchanged at around pounds 179m. "In the long term they're a very solid buy. Management have a clear strategy and are very good at executing it," said Will Mackie, engineering analyst at Credit Lyonnais Laing. "But the shares are up with events."

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