FR disappoints at half way: Depressed aviation market hits flight refuelling division

SHARES in FR Group, the aerospace engineer, dropped 18p to 233p after disappointing interim results and a warning of no improvement in the second half.

The company made pounds 10.4m before tax in the six months to 30 June, against pounds 11m last time. Overall turnover was marginally ahead at pounds 86.9m ( pounds 85.4m).

But the company said the outlook for next year was brighter, as it announced two acquisitions costing pounds 18m in total. First-half results were hit by problems at the three divisions. Flight refuelling suffered from the depressed aviation market worldwide, exacerbated by the near- collapse of GPA. There were also delays in military procurement as defence budgets were cut back.

Stanley Aviation was hit by a continuing dispute with McDonnell Douglas about the supply of engine positioning equipment for the US airforce's C-17 military transport aircraft.

Meanwhile, FR closed its ammunition supply business in the Netherlands after a massive drop in demand from the Dutch armed forces.

Gordon Page, chief executive, said the company had moved quickly to address the problem divisions, but redundancy costs would depress the second-half figures.

Redundancies in the flight refuelling division in September cost pounds 1.1m, while the Dutch closure would cost pounds 175,000. There was also some trimming of management at a cost of pounds 100,000.

But he said that the group's remaining businesses - which account for about two-thirds of turnover - were all performing well. 'Any business that comes through now is not going to make an impact until next year, when we might have some fun.'

FR has bought High Temperature Engineers (HTE) for pounds 13m to complement the arerospace components business of the flight refuelling division.

The group has also agreed to buy the life support products division of ARC Corporation of the US for dollars 9.5m ( pounds 5.3m).

Edward Stanford, analyst at Albert E Sharp, said the market was disappointed that the group only maintained the interim dividend, at 2.46p, but said it was well-placed to make a strong profits recovery over the next couple of years.