Investment Column: Would-be high-flyer EIS remains firmly earthbound
Tuesday 29 April 1997
Yesterday, the group compounded its dull record with a warning that it had been hit by the combined impact of depressed European markets and a strong pound. The news sent the shares crashing 32p to 312.5p, a level not seen for more than five years.
The 1996 figures accompanying the announcement suggested a year in line with recent form. Pre-tax profits rose 15 per cent to pounds 23.4m but share earnings barely moved.
The pounds 18m acquisition of Aerostructures Hamble at the end of 1995 still looks expensive. EIS admits the business, which has only just broken into profits, was in a shakier condition than it first thought and it is taking another pounds 5.2m write-off. It should have been well warned: Aerostructures, which makes the leading edge of wings for plane makers such as Boeing, was one of the worst in a string of disastrous new issues a few years ago.
But its strenuous efforts to get key contracts for Boeing's 737-700 and the McDonnell Douglas MD 80/90 back on track are being rewarded in much increased business. Production of four wing sets a month for Boeing is set to more than double to 10 by the end of the year and recent forecasts by Smiths Industries suggest output of the aircraft could double again by 1999.
EIS is strongly geared into the rising civil aviation market, which accounts for around 60 per cent of the pounds 252m sales out of the group's aircraft and precision engineering division. But the outlook for the other 40 per cent involved in defence is also increasingly rosy.
The other half of EIS, in oil, gas and petrochemicals engineering, is less exciting. The group claims to be attempting to move away from the sort of process engineering operation traditionally bedevilled by lumpy income and contract disputes. But its fluid seals and disc brakes arms suffered in this way last year.
Acquisitions, plus higher working capital requirements, sent gearing up to 44 per cent at the year end. The recent sale of the Technical Mouldings business should see that come back to a pro forma 25 per cent, cutting the interest bill, so profits of pounds 25m should be in sight for this year. That leaves the shares on a lowly forward p/e of 10. The fundamentals are there, but manage- ment looks in need of an infusion of new blood. Avoid.
- 1 Engineer pictured fixing plane's engine with 'duct tape' by concerned EasyJet passenger
- 2 Two-year-old says goodbye to bin man best friend
- 3 Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
- 4 There is something wrong but very right about this Bible illustration
- 5 Remove smartphones from the hands of under-18s and maybe they will grow up to be less dumb
Engineer pictured fixing plane's engine with 'duct tape' by concerned EasyJet passenger
Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
Ancient 2,400-year-old gold bongs discovered in Russia
Porn stars in California may be forced to wear goggles under new legislation
Tampon tax scrapped in Canada after petition convinces conservative government
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...