Investment Column: Bad news is good news for AEA

The worse the news gets from the Kyoto earth summit in Japan this week, the better it will suit AEA Technology, the consultancy and engineering arm of the Atomic Energy Authority, privatised just over a year ago.

The fight against global warming is one reason why AEA, which yesterday reported half-year operating profits to September up 41 per cent to pounds 9m, believes it can double turnover to pounds 500m by the turn of the millennium.

Environmental engineering already accounts for one-fifth of group turnover, with clients including most of the oil majors, and looks a good bet for further expansion.

Other growth opportunities include the railways, where AEA is working with Railtrack on new train safety systems, nuclear science, engineering software and batteries.

Just 15 months after flotation, AEA, which once relied on contracts from its former parents for more than half its turnover, is unrecognisable. The lithium-ion battery business - AEA has the rights to license the world's biggest producers - remains the mainstay of the technical products division and negotiations are under way with a Japanese partner to establish a plant in the UK producing rechargeable batteries.

After splashing out pounds 40m to buy Hyprotech, a US process software business, and the environmental engineer ERG in the past six months, the pace of acquisitions may slow. But interest cover of 12 times leaves AEA with sufficient firepower.

AEA should make pounds 29m in the full year, putting the shares, up 1p to 436.5p, on a forward multiple of 19. The group has lost its premium to the engineering services sector. But the shares, now 60 per cent above their issue price, could be due a rerating if Kyoto proves the CO2 cloud with a silver lining.

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