TIP OF THE YEAR 2009: Redhall (RHL)

The future for UK engineering looks pretty horrible, but there are certain niches that are both defensive yet growing, and nuclear engineering is one of them. So Redhall, an Aim-quoted specialist engineer with a strong presence at both Sellafield and Aldermaston, is particularly well placed.

David Jackson and Simon Foster, who used to run the rail-engineering firm Peterhouse before its £100m sale to Babcock International in 2004, have replicated their previous success at Redhall. They took on Booth Industries in 2005 and have added a series of well-timed acquisitions.

This has given the company a strong foothold in providing specialist nuclear engineering services, a sector with high barriers to entry because firms that tender for contracts must meet tough safety and security standards and provide qualified personnel. Redhall's board was strengthened last year with the appointment of chief operating officer Tony Price, who was formerly with British Nuclear Fuels as director of decommissioning and major projects at Sellafield. Mr Price's aim is to push Redhall up the value chain to become a so-called Tier 2 supplier to the nuclear industry. From there, it can control the supply chain into projects rather than being a part of the chain, thereby capturing more value.

Redhall already has a strong presence at Sellafield, where it supplies both decommissioning and new build services through its Jordan and Steels businesses. Recent contract wins include the supply of pond furniture, which is used to store spent nuclear fuel. At Aldermaston, Redhall is also well established with five of its businesses working on Ministry of Defence (MoD) projects. At both Sellafield and Aldermaston, Redhall companies have been voted 'contractor of the year'. Redhall also supplies services to other nuclear sites around the UK, having increased its presence from two to five UK nuclear sites in the past year.

With decommissioning a major government priority, possibly to be followed by a hefty new-build programme, the sums to be spent on nuclear power in the coming years could be huge. In the short term, the Nuclear Decommissioning Authority has announced an £8.6bn budget for the period to 2011. In addition, the MoD is committed to spending £1bn at Aldermaston over the next three years.

With one eye on the future, Redhall has also formed a joint venture with a French nuclear engineer, ONET, which has preferred contractor status on three nuclear sites. This relationship could become very important if a huge nuclear new-build programme is rolled out. Last autumn's acquisition of Chieftain increases Redhall's exposure to the marine nuclear sector, although the government's programme has recently been pushed back.

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Redhall does have exposure to the private sector through products for the food, chemicals and oil and gas sectors, where demand is almost certain to weaken in the coming year. For now, however, demand from the oil industry for Redhall's storage, refinery and downhole pumping equipment is holding up. Redhall's bosses add that demand from food processors is picking up after a quiet six months.

With a sound balance sheet, the group looks in a solid position to weather any slowdown. It ended the year to September with cash in the bank and also has debt facilities available through to 2014. Further acquisitions are possible, and with them would come the risk that is inherent in all acquisitions, but Redhall's bosses are adamant they will not take on significant debt in the current economic climate. Indeed, Redhall's financial strength is already bringing benefits - the company has been called in on three projects to pick up work where rivals are struggling to fulfil obligations. Redhall's contracted orders for 2008-09 stood at £75m after just two months of the financial year.