Suppliers back in top gear

THE remarkable renaissance of vehicle manufacturing in the UK is good news for local equipment suppliers. The day is now confidently expected when the number of cars made in the UK will once again top 2 million a year, and there is surprising buoyancy at the heavier end of the vehicle market.

Truck demand is booming, and even sales of agricultural and construction equipment are not doing badly, helped by strong exports. And there is the prospect of an eventual improvement in UK demand for construction equipment.

Among companies benefiting from this recovery are Morris Ashby, which makes pressurised aluminium dies, and Airflow Streamlines, which makes cabs for trucks and tractors and prototype bodies for cabs, trucks and vans. Neither company is closely followed by the investment community, leaving room for awareness to grow and the share prices to improve.

Some idea of the optimism about prospects at Morris Ashby comes from the plans for its UJP Tools subsidiary. UJP makes tools which are used by Morris Ashby to mass-produce brackets, transmission parts and many other items for such big car and part makers as Ford and Lucas. Morris Ashby acquired UJP in 1992 and is building a new factory to take capacity from pounds 1m a year to pounds 2.5m. Not only is much of this increased toolmaking capacity expected to be taken up by the parent company, but management also wants protection against the possibility that if demand really picks up, toolmaking capacity could be in short supply.

A key factor in the group's success has been its sustained investment programme through the recession. It is half-way through a five-year, pounds 15m project to add capacity and improve productivity. Such programmes are possible because Morris Ashby and other suppliers have become more closely involved with their customers early in the design and planning process.

These "partnership" arrangements have also encouraged the car companies to concentrate their business on fewer suppliers, helping the selected ones to gain market share. Morris Ashby does well because it has a reputation for innovation and technical expertise. Aluminium has been gaining market share, especially for under-bonnet applications, because it is lighter than iron and steel and helps fuel-efficiency.

Morris Ashby's sales have risen from pounds 6.5m in 1987 to an expected pounds 30m for the year to March, due out in July. A 1993 rights issue has diluted the growth in earnings per share in the latest year, but as the rights issue money is deployed, full benefits should come through, taking current- year earnings from 14p to 19p, dropping the price-earnings ratio to just over 12 at 233p. The growth should continue, supported by the investment programme. Over five years, sales and profits could repeat the twofold to threefold rise of the past five years.

Airflow Streamlines has significantly bigger sales than Morris Ashby, but has a lower stock market profile. The shares are tightly held and thinly traded. I wrote about them last November, when the price was 153p. Since then the shares have shot up to 240p, reflecting a near quadrupling of profits from pounds 1m to pounds 3.7m for the year to February. The proximate reason is that the factories, which normally tail off in December and January after a strong quarter, just kept on booming.

The deeper reason for the buoyant demand is the impressive performance of such customers as JC Bamford, Caterpillar, Ford New Holland (the tractor division of Ford) and ERF, the UK truck manufacturer. Indications are that the surge in demand is continuing.

Meanwhile the group's other main business, body engineering, is also doing well. One analyst close to the company expects first-half profits to double from pounds 1m to pounds 2m. Full-year prospects depend on whether last year's amazing second-half performance can be repeated or exceeded. Even on a cautious view, profits should reach at least pounds 4.5m to drop the p/e ratio to an undemanding seven.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there