With a warchest from its new Chinese parent, UK aerospace supplier Gardner Aerospace is eyeing acquisitions and expansion into China – aiming to benefit from what it believes will be further consolidation in the aerostructures sector, alongside an eastward shift in the supply chain.
Gardner’s former owner, Better Capital, completed the £326 million ($418 million) sale of the build-to-print structures and metalic parts specialist to mining group Shaanxi Ligeance Mineral Resources [SLMR] days before the start of the show.
The fund had owned the once-ailing Gardner since 2010, injecting £41 million into a programme of acquisitions and capital investment, and restoring its profitability. That expansion spree has taken Gardner to a turnover of £132 million in the last financial year, with facilities in the UK, France, Poland and India, and a workforce of 1,600.
Now Gardner’s business development director Nick Guttridge believes that a further series of acquistions and a move into China’s burgeoning supply chain could “within a few years” push revenues to beyond $1 billion, around five times its current level.
“We’ve seen massive consolidation in other aerospace sectors, such as interiors and avionics. This sector [aerostructures and parts] is consolidating, but there is still a long way to go,” he says. “We’ve always thought of ourselves as a consolidator. We’ve got a great track record in M&A [mergers and acquisitions].”
SLMR made its name in the 1990s when it discovered supplies of rare earth material Rhenium, used in a superalloy in jet engine turbine blades among other applications. Since then the Chinese company has diversfied into aerospace manufacturing, setting up production facilities for casting turbine blades and powder coating for turbine blades, as well as an unmanned air vehicles business.
SLMR targeted Gardner because of its expertise in serial production, parts certification and supply chain management, says Guttridge. For Gardner – which retains its management team with two SLMR representatives sitting as non-executive directors on its board – the Chinese connection gives the Derby-based company “access to a market that is going to go bananas”, says Guttridge.
As the major airframers sell more aircraft into China, they are going to come under pressure to give increasing amounts of work to Chinese suppliers. But for them to do that, says Guttridge, they have to have faith that these suppliers adopt Western levels of production discipline. “We could copy and paste our business model and take it to China,” he says.
Another significant market driver that Guttridge believes will help Gardner achieve its turnover aspirations is pressure for “horizontal consolidation”, as customers opt to work with fewer suppliers and with those who they can trust with complex work packages. “We are seeing significant outsourcing by companies such as GKN and Airbus,” says Guttridge.
Although it does not do its own design engineering, Gardner is a direct supplier to many of the biggest names in the industry. Among its contracts for Airbus, its largest customer as a tier one, it provides the engine pylon secondary structure for the A330neo and also works for the European giant’s helicopters and defence and space units.
In a deal to be announced this week, Gardner will deliver packages of sheet metal work for various Airbus airliners, including the A320 family, the A300 and the A380, as well as the A400M military transporter. Products will include aluminium brackets as well as the A320 pyramid structure. First delivery from Gardner’s Mazeres facility near Toulouse is scheduled for the second half of this year.
Other clients include Airbus suppliers Latecoere, Stelia, Premium Aerotec and GKN, as well as Leonardo, Rolls-Royce, Spirit AeroSystems and Triumph. Some 80% of its output is for European customers. Asked about the possibility of a US factory in the future, Guttridge responds with a smile: “Watch this space.”
Gardner has a total of 10 factories: five in the UK, two in France, two in Poland and one in Bangalore, India. It bought the French businesses, which traded as Airia, in 2012 to be close to Airbus’s Toulouse assembly lines. However, around a third of its workforce is based at its lower-cost centres in Poland and Bangalore in India.
Gardner was loss-making for much of the 2000s and went into administration in 2003. In 2006 Rolls-Royce was forced to invest in the company to keep one of its key local suppliers afloat, after one of its main investors at the time refused more cash. Since the Better Capital acquisition, however, Gardner has enjoyed a Lazarus-like revival, with expansion into France and directly onto the Airbus supply chain in particular.
The evening before they travelled to the Paris air show, Guttridge and his colleagues had a chance to welcome their new boss and his senior team to the UK with a reception at one of the newest and trendiest Chinese restaurants in the City of London financial district. The coming together of Chinese mining magnates with the British managers of an aerospace parts company may have needed a translator to get round the formalities, but there is no misunderstanding over SLMR’s ambitions for its new subsidiary.
The move has has made “life even more exciting” for Guttridge and his senior management colleagues. “We have become very strong in Europe,” he says. “This is our chance to go global.”