A quarter of the UK Aviation Equipment industry is showing signs of recession

Keywords: Aircraft industry, Equipment, Recession

A recent Plimsoll analysis indicates that a quarter of the Uk's aviation equipment industry is showing signs of recession. The analysis finds companies must be adopting one of four views on the current recession debate. Taking the findings of the research and interpreting it, the following conclusions have been drawn (Table III).

 Table III

Current views on the recession:

"I'm in a recession now"

25 per cent of the industry is losing market and profitability. These companies are finding the market tight and highly competitive.

"There is no recession

36 per cent are showing no signs of recession at all. These companies are powering into the market and uncovering great returns.

"I'm preparing for the worst just in case"

13 per cent are adopting a steady approach trying to profits and in most cases, are using these profits to pay off debts.

I'll blast my way through

25 per cent are going for it striving for as much market as they can get. Currently though these companies are showing poor returns for their efforts.

A quarter of the 277 companies studied in the Aviation Equipment industry are feeling they are in a recession. These 68 companies have seen sales decline a staggering 18.2 per cent on average over the last year. 41 per cent are now at high financial risk according to Plimsoll and on average all of these companies are loss making.

These companies tended to be the smaller companies and are seemingly getting left out an otherwise healthy market. Current market growth for the industry is a healthy 7 per cent. Profitability is on the right side of the red line at 5.2 per cent. Efficiencies seem to be good at the moment and sales per employee numbers are healthy at around £71,000 per person.

Comparing dismal performance with the exceptional, Plimsoll located 101 companies who grew way above the industry average with 16.1 per cent! These companies would definitely not consider themselves to be in a recession at the moment and who could blame them?

For those 37 companies who are preparing for the worst in case of a recession, Plimsoll found overall debt had remained level in these companies. Although profitability is steady at 6.5 per cent, their compromise seems to have been sales growth. Last year saw a 13.8 per cent drop in their sales. Motivation and future competitiveness for these companies should prove interesting.

Perhaps the most captivating are those companies who plan on going for growth no matter what the cost if a recession hits. These 70 companies are growing at 15.1 per cent on average. Like those companies most fearful of recession, all of these companies are on average loss makers. This cavalier approach to recession is no doubt brave but perhaps a bit too risky.

The fact remains some companies thrive in a buoyant market and others lose ground commercially and financially. It could be suggested that in this virtual game of Snakes and Ladders, companies fearful of sliding into recession might be the most attractive to acquirers.

Plimsoll's own research suggests that recession should not be measured by industry(s) as a whole. "To generalise on company performance seems outdated and flawed. Recession will be more accurately determined by individual companies. It is up to individuals as to what stance they have on the issue and what strategies they will take to ensure survival," says David Pattison, Plimsoll's leading financial analyst.

Using a simple method of assessing the individual companies, the Plimsoll Portfolio Analysis: Aviation Equipment lays bare the performance of each of the Top 1 000 companies. Are you named, shamed or blamed in the recession analysis?Readers of this publication will receive a 5 per cent discount when mentioning this article upon ordering

Details available from: Plimsoll, Tel: +44 (0) 1 642 257800; Fax: +44 (0)1642 257806; E-mail: plimsoll@dial.com;Website: www.plimsoll.co.uk