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UPDATE 1-Exova says weak N.America aerospace, transportation markets to hurt
August 29, 2014 / 9:15 AM / 3 years ago

UPDATE 1-Exova says weak N.America aerospace, transportation markets to hurt

* Says full-year underlying organic growth to be broadly similar to first half

* Sees weakness in parts of aerospace, transportation testing in N.America to continue

* First-half revenue hurt by strong pound

* Shares sink more than 10 percent (Adds CEO comments, details, background, share movement)

By Esha Vaish

Aug 29 (Reuters) - Exova Group Plc, a material testing services provider, said on-going production related delays from aerospace clients and lower levels of projects from transportation clients in the Americas would hold back underlying organic growth this year.

Shares in the company, which posted a fall in first-half revenue and a wider pretax loss, fell more than 11 percent, making the stock one of the top percentage losers on the London Stock Exchange on Friday.

Exova said it expected underlying organic growth for the full year to be broadly in line with the first half as strong demand from some of its markets would be mitigated by a weakness in parts of the aerospace market and transportation testing in North America.

The company provides laboratory-based testing, fire safety and calibration services to clients such as Boeing Co, Airbus Group NV, Ford Motor Co and Siemens AG .

Revenue from aerospace, for whom Exova performs services such as corrosion testing, fell 8.1 percent to 21.7 million pounds during the six-month period. The company gets 16 percent of its revenue from aerospace clients.

Chief Executive Ian El-Mokadem told Reuters that slow progress with the ramp-up of production volume on some of Airbus, Boeing and other airplane makers’ newer models would impact Exova’s business.

“The order books of those aircraft have never been stronger. As Boeing, Airbus and others start to ramp up their production volumes, the whole supply chain will benefit from that (in the medium-term),” El-Mokadem said.

Exova also had secured one “sizeable” contract in its transportation testing business, the benefits of which would filter through next year, El-Mokadem said.

The company did not give a break-up as to how much of its revenue it gets from transportation clients in the Americas, for whom its carries out engine-performance, component and structural testing.

Exova said revenue slipped to 134.7 million pounds ($223.4 million) in the six months ended June 30, from 138.4 million pounds a year earlier, hit by an increase in the value of the pound.

Excluding the impact of a stronger pound, underlying revenue rose 3.4 percent.

The pound rose more than 3.3 percent against the dollar during the first half, making foreign exchange drag a common theme for British companies in the first half.

Exova posted a bigger pretax loss of 38.1 million pounds during the six-month period, weighed down by one-off costs associated with its April IPO and of redeeming and replacing its debt. Pretax loss was 10.3 million pounds a year earlier.

Exova was listed on the London Stock Exchange with a market capitalisation of about 550 million pounds, after it sold 100 million shares for 220 pence apiece.

The Edinburgh-based company’s shares, which have fallen close to 3 percent since going public, were down 9.6 percent at 194.3 pence at 0855 GMT.

The company was formed when Bodycote Plc sold its material testing business in 2008. ($1 = 0.6031 British Pounds) (Reporting by Esha Vaish in Bangalore; Editing by Gopakumar Warrier)

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