Global defence cuts hit MSI

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Specialist engineering group MS International said today its revenue and profit had been hit by the ‘prolonged downturn’ in defence spending by governments around the world.

The Doncaster-based firm said cutbacks on defence spending had affected its defence division’s revenues but added that many of the markets served by its forgings and petrol station superstructures divisions have progressively improved.

In the half year ended November 2, the group made a pre-tax profit of £1.9m, down from £2.4m for the same period last year. Revenues were £23.34m, compared to £26.28m the previous year. Earnings per share amounted to 7.9p, down from 10.2p.

Chairman Michael Bell said the balance sheet remained notably robust with further expansion in its net cash and short term deposits, which increased to £14.12m, up from £13.45m in April.

He added that the defence division took action to realign its cost structure at the start of the year and bring it into line with expected levels of activity.

“Delays in major shipbuilding programmes persist and demand for equipment, that may once have been regarded as low budget, general expenditure items, is also being affected. This downturn is the reality of a cyclical global defence market,” he said.

He added: “Encouragingly, the structure of the defence division’s order book provides a solid base load of business stretching out to the end of the decade.

“This means that, despite any current market slackness, the division not only has contracts to be completed within the current year, but also has the positive benefit of a continuous stream of business, scheduled by customers for delivery in each successive year through to 2020.

Clearly, our objective is to build on this excellent foundation and ensure that we win sufficient additional business to convert into revenue in each of those future years.”

By contrast, he said that forgings and petrol station superstructures operate in markets where short lead-time order books predominate, providing limited visibility. However, he added that within both divisions there was a good measure of optimism that a satisfactory level of activity should continue through to the end of the financial year.

“There is still some time to go to the year-end but, given the current defence market, the board reaffirms its earlier guidance that profits before tax for the full year will be lower than that reported last year,” he said.