Exova overcomes weak energy markets with acquisitions and diversity

Exova, which operates 138 laboratories and offices across 33 countries, stomached a 16 per cent fall in organic, constant-currency sales in its oil, gas and industrials segment. The main culprit was the depressed oil price, which resulted in lower project spending in Europe, fewer clients and pricing pressure in the Americas and less activity in Asia. But comparable revenues rose by at least 4 per cent across Exova's other divisions, reflecting strong demand for aerospace testing in Europe and the Americas and road and rail investments in Saudi Arabia and Qatar.

Exova used acquisitions to expand its product range and diversify away from the underperforming segment. Management bought Admaterials and - just after the period ended - Jones Environmental Forensics, which specialise in construction testing and contaminated water and soil analysis respectively. It also sold 10 laboratories engaged in food, water and pharmaceutical testing in the UK and Ireland, giving management more time and money to target growth markets.

Exova's bosses expect oil and gas trading to weaken further in the second half. Broker Credit Suisse expects adjusted pre-tax profits of £44.6m for the full year, giving EPS of 12.9p (up from £40.4m and 12.2p in 2015).