BUSINESS NEWS
10 Jun 09. After years of record growth, the British aerospace industry is now coping with flat sales, a falling order backlog and a slump in research spending that could jeopardise its world standing. Despite the tailwind of a sharp decline in the value of sterling, in 2008 industry-wide revenues only held their own at around £20.6bn ($33.6bn), according to the Society of British Aerospace Companies’ (SBAC) latest survey. Employment levels fell 11 per cent to 100,740, although that helped boost productivity by 15 per cent to £203,000 per employee. The order backlog, a key measure of the future workload aircraft makers can expect, slid 23 per cent to about £35bn, providing yet more evidence that the records of 2007 are past as airlines and governments tighten their belts. Perhaps more worrying for the long term was a 32.2 per cent fall in R&D spending, which affected defence in particular. Although R&D numbers can be volatile, affected by a small number of large programmes, the downward trend is clear. Alex Dorrian, SBAC president, said cuts were not surprising given the tough market conditions, but added “this is a substantial drop which, if sustained, could reduce our competitiveness on the international stage”. The news comes just days after the International Air Transport Association released a gloomy review of the global airline industry, suggesting that airlines could lose $9bn this year, double the level forecast in March. Searching for some positive news, the SBAC could only point to a modest rise in civil and defence exports and an increase in the number of students taking aerospace related degrees. To protect and extend the UK’s lead the SBAC urged government and companies to take a number of steps as part of its roadmap for the civil aerospace sector over 20 years. Key recommendations included investing more in areas such as clean technology, pioneering the development of future air traffic management systems and creating a national aerospace research entity. Still, coping with the current downturn is likely to be the corporate priority in the short term. Slower growth could force greater pan-European co-operation in order to pool resources and also drive a new wave of mergers in the aerospace industry, according to Ian Godden, SBAC chief executive. “We are going ex-growth after the fastest 10 year period of growth the world has seen and that should force some consolidation,” Mr Godden said. “The Pacman game is running – companies are looking at who to swallow next.” (Source: FT.com)
22 May 09. Metal Storm seeks investors. Australian firm Metal Storm has commenced negotiations with a small number of overseas defence businesses, which are interested in investing in the weapons developer, the chief executive officer of the company has told Jane’s. Lee Finniear said Metal Storm was looking to secure investment worth up to AUD30 million (USD23 million) and that discussions had started with overseas defence companies as well as Australian-based financial investors. (Source: Jane’s, JDW)
09 Jun 09. Roll-Royce bucked the weak market trend after a leading broker said the civil aerospace sector was more attractive on a three-year view than defence.”We actually expect civil aerospace earnings to bottom in 2010, as 2011 brings strong after-market growth, cost reduction benefits, and better foreign exchange hedge rates,” Goldman Sachs said, as it withdrew its “sell” rating on Rolls, up 1.9 per cent to 335½p, and upgraded Meggitt , 2 per cent higher at 166¼p, to “buy”. In contrast, the broker told clients, defence companies such as BAE Systems , down 1.6 per cent at 334¼p, and Cobham , off 3.2 per cent to 174.3p, would struggle as operations in Iraq and Afghanistan were scaled back and the UK and
US governments were forced to rethink their defence budgets.”We expect defence margins to fall in the US and UK on weaker volumes and reform of the respective procurement systems, especially in the US,” it sai