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Hampson's first-half results were flattered by business disposals and gains on financial instruments. But the cost of production delays in key aircraft projects, combined with a global slump in demand for automotive parts, has hit the group hard.
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The major problem is the unprecedented number of delays to major projects, such as Boeing's Dreamliner and the Airbus A380 airliners. These hit the aerospace components and structures division particularly hard, with sales down from £46m to £28m. The group benefited from disposals and Hampson Aerospace Machining was sold in the half for £24m, generating a £0.6m profit; the disposal also knocked £5m from group sales. If this, and further one-off gains from increases in derivative instruments are stripped out, then underlying pre-tax profits were £11m, compared with £16m in 2008.
The group also booked more than £7m of impairment charges to its automotive division, which specialises in making turbochargers, to reflect the downturn in the market. Hampson also renegotiated a covenant on its £140m net debt, with interest payments now set at 3.5 percentage points above LIBOR, compared with 1.75 points before. This will add £1.5m annually to Hampson's interest charges. Finance Director Howard Kimberley said there had been a pick-up in the order book since August of close to 30 per cent, although it is difficult to predict when these deals will be turned into revenue.
Broker KBC Peel Hunt cut its forecast for 2009-10 pre-tax profits from £28 to £25m, with EPS cut from 12.2p to 10.9p.
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More analysis of company results
HAMPSON (HAMP) |
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|---|---|---|---|---|
| ORD PRICE: | 76p | MARKET VALUE: | £121m | |
| TOUCH: | 75-77p | 12-MONTH HIGH: | 128p | LOW: 62p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | na | |
| NET ASSET VALUE: | 128p* | NET DEBT: | 69% | |
| Half-year to 30 Sep |
Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 111 | 12.5 | 6.46 | 0.80 |
| 2009 | 97 | 13.5 | 5.95 | 0.80 |
| % change | -13 | +8 | -8 | Nil |
Ex-div: 20 Jan Payment: 12 Feb *Includes intangible assets of £288m, or 181p share. |
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Most of Hampson's problems are beyond its control - the company must wait for the big aircraft makers to sort out production issues. Yet, the rating on its shares - just seven times forecast earnings - is far below its long-term average. Good value.
Last IC view: Fairly priced, 76p, 16 June 2009
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-IC-2.1.3g-prod - 17/03/2010 18:13:09 - ben.wheeler
