Exciting future in the pipeline following the takeover of Aerotech Tubes
THE mountain of orders that have been amassed for aero-engines in Sinfin represents the biggest challenge for the local aerospace industry for a generation.
The pressure is on for Rolls-Royce to deliver more than 1,000 Trent XWB engines.
With a significant proportion of engine parts being machined and finished outside the Sinfin plant, the concern is that firms in the supply chain will struggle to cope with the increase in work.
That is why there is consolidation happening in the aerospace market and acquisitions are becoming more prevalent.
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A typical example is that of Aerotech Tubes, at the Prime Enterprise Park, in Derby.
It has great expertise and a highly-skilled workforce but is a relatively small company, turning over more than £2m per annum and employing about a dozen people.
Businesses such as Rolls-Royce, in the UK, and GE, in the States, are looking to the future and are uncomfortable with the complexities, headaches and costs that come when dealing with hundreds of small suppliers.
Economies of scale are much harder to achieve with hundreds of smaller operators as well.
That is why, locally, we have seen Gardner Aerospace acquiring other businesses in France and India and the sale of Castle Donington firm Paul Fabrications to Oklahoma-based AGC Aerospace and Defence.
It is also the reason why Aerotech has been bought out by Avingtrans Plc, in Sandiacre.
But this is not a takeover that means concerns for the workforce having to move to a larger factory elsewhere.
Avingtrans director of aerospace Mark Johnson said: "It is a good going concern and it makes sense for us to have a base in the centre of Derby.
"We might have a factory in China but, for all of its advantages, it is a long way away and, when fast turnaround times are required, it is important to have a manufacturing facility close to a major customer.
"Aerotech Tubes was a company that we have known about for a long time but we first got talking about the acquisition about four or five months ago.
"It is a question of making our business more efficient and effective."
The pipes manufactured by Aerotech carry fuel, oil, air or water through an engine and, if something goes wrong with one of them, the engine would fail and cause a disaster.
So important is the workmanship at the Derby site that Rolls-Royce took an active role in negotiations to sell the business.
Effectively, there were three parties involved, the buyer, the owners of Aerotech and Rolls-Royce wishing to ensure continuity of business.
Mr Johnson said: "The pipe assemblies made in Derby are safety-critical components in an engine and the Aerotech business fits perfectly with what we're doing in other parts of the business."
November was a busy month for Avingtrans.
The company sold its industrial products business, Jena Tec, for £13.45 million a few weeks ago, which boosted its share price and gave it a war chest for the potential acquisition of more businesses.
Even prior to the cash this sale brought in, the company had already bought Buckinghamshire firm Sigma Composites, which has an interest in the aerospace market.
Just prior to the Aerotech position, Avingtrans acquired the trade and various assets from the Farnborough site of PFW.
It splashed out £1.85m on the deal and the company has said that it is continuing to look at other purchases to further its ambitions in the aerospace sector.
"The two acquisitions that we have just completed have partly taken place because this is what our customers want to see and they are very pleased with our strategy," said Mr Johnson.
"The Aerotech deal was great news for everyone involved. This is positive consolidation because what we are creating is more than the sum of its parts.
"The aerospace industry is in an upward cycle and, across our businesses, we've added between 60 and 80 people in the past 12 months.
"I've been in the industry for 30 years and it's the most exciting time I've seen."
There are likely to be more transactions in the aerospace market in 2013 and, although no plans have yet come to fruition, Avingtrans is looking at other targets.
"One of the biggest challenges for the expanding industry is getting the right people with the right skills," said Mr Johnson.
"The profile of our workforce shows that the average age is increasing, so we are trying to bring young people in and train them up."
Fortunately, in the last few years, the Government's attitude to manufacturing has changed.
"For years, manufacturers had not been given enough backing but, in the last two or three years, the pressures on the UK economy have brought the sector back into the light."
Last year, the company's aerospace division reported a record order book, a 34% increase in revenue and its Chinese business up by 52%.
Aerospace revenues were £17.1m and, taking into account recent acquisitions, that figure is expected to be higher in the next report.
C&H Precision Finishers, in Sandiacre, had a solid year and, as well as carrying out work for Rolls-Royce, is finishing turbine blades for Alstom. The newly-enlarged business has already been rewarded with an £80m contract with Rolls-Royce to supply rigid pipe assemblies and components over ten years.
Investors enjoyed the news and the Avingtrans share price saw a boost.
Though the work will be carried out in Hinckley, Leicestershire, it helps cement Avingtrans' relationship with Rolls-Royce, which can only benefit its factories in Derby and Sandiacre.
To further the company's ambitions, there are plans afoot to rebrand Avingtrans' aerospace companies to highlight the fact that they all come under the same umbrella and therefore have a bigger global presence.
Mr Johnson said: "We are looking at establishing a platform in North America. There's always something more to do."