Strength to strength?

Citation

(1998), "Strength to strength?", Aircraft Engineering and Aerospace Technology, Vol. 70 No. 5. https://doi.org/10.1108/aeat.1998.12770eaf.003

Strength to strength?

Strength to strength?

Keywords Aircraft industry, Finance, Plimsoll

Results from the latest aviation equipment industry analysis from Plimsoll Publishing Ltd show an improvement in the proportion of financially-strong companies in the industry. A total of 44 per cent of companies were defined as being financially strong, while 41 per cent were classified as suffering from some form of financial difficulty. This compares to figures of 43.5 per cent of companies classified as financially strong and 43.8 per cent as financially weak 12 months ago.

Companies classified as being financially weak are not necessarily in imminent danger of going out of business, but it does signal a need for change, a financial restructuring or repositioning of the company in the marketplace for instance. Some companies may, as a result of expansion or restructuring, go through a period of financial instability until the benefits of the change filter through to the profit and loss account; success or failure are not generally overnight occurrences. However, if the company in question does not take steps to rectify the position it could certainly lead to its demise; a company in a financially weak position has to either improve or face liquidation.

Table I Companies which have improved their financial position

	Sales growth		Profit margin
Company	(%)		(%)
Morganite Special Carbons Ltd		24.3		17.9
Air Transport Avionics Ltd		24.2		12.9
H&S Aviation Ltd		5.4		11.4
BAC Express Airlines Ltd		31.4		3.9
Krupp Hoesch Woodhead Ltd		­2.0		7.5

Table I shows examples of companies which have, after a period of financial weakness, managed to improve their position.

Sales growth figures for the industry deteriorated during the last year. The current industry average for sales growth is 9.2 per cent compared to 12.8 per cent 12 months ago. Pre-tax profit margins have increased to 5.0 per cent as a proportion of sales from 4.3 per cent a year ago.

Cheering news, however, for the industry's employees, as average salaries increased over the same period, the average employee now earns £21,300, up from £20,600. Directors allowed themselves a bonus; the average payout to a member of the board rose from £30,600 to £31,500 over this period.

The report, the Plimsoll Portfolio Analysis ­ Aviation Equipment, 2nd ed. 1998, analyses 1,203 companies involved in the industry. To assess the financial strength of these companies the Plimsoll model examines the companies' last four years of audited accounts and uses the key financial indicators: immediate liquidity, gearing, profitability, working capital and trading stability. These are weighted and combined to form the Plimsoll chart, an indicator of a company's financial position. As the model is standard for every company it is easy to distinguish the strong from the weak and make rapid inter-company comparisons.

For further details Tel: +44 (0) 1642 257800; Fax: +44 (0) 1642 257806; E-mail: markplimsoll@dial.pipex.com