After solid performance throughout downturn, US engineering specialist says it does not need to go public to prosper

It is enough to make a day trader weep. A private aerospace company that delivers double-digit growth for six years straight, even through the 2002 meltdown, spends four years on the brink of flotation - then decides to remain private.

The growth prospects of US specialist engineering house Arinc show no signs of tailing off, but for now the owners of this poorly understood company, primarily US airlines, have more pressing issues to deal with than capitalising on their talented progeny.

That leaves chief executive John Belcher with the open-ended task of driving continuing growth without the financial resource a public offering would generate. Some might be frustrated; Belcher, who is the obvious choice to succeed James Pierce as chairman, is not immune but clearly relishes the challenge.

Interviewed at Arinc's modest European base near London Gatwick airport, the affable Canadian is relaxed and bemoans how rarely he makes the trip from Arinc's Annapolis, Maryland headquarters.

The serviced office, where the same switchboard operator cheerfully answers on behalf of half a dozen lesser-known aviation companies, is typical of Arinc's lean operation. Its European unit, created in its current form only in 1997, has been a big success under vice-president Graham Lake, but still has a long way to go to match local arch-rival Sita in size - or premises.

Belcher is an engineer through and through, and he and Lake can discuss datalinking or any other product at any level of detail, but the chief executive jumps on suggestions that his enthusiasm for engineering might make him soft on financial discipline.

He says: "I am a hands-on CEO and a business person. I happen to have a technical background. But if you have that background then when you are running an engineering business no-one can fool you. I am a business person and I am going to maximise my earnings for the shareholders."

He continues: "We try to set a clear strategy. We want to double the company every five years, which we have been doing, and that is from growth not acquisition. To do that you have to diversify.

"We are now taking our great skills to surface transportation and business jets. If you look at our total company then today it is 90% aviation."

Referring to the possible flotation, which advisers are said to have estimated could have raised more than $500 million, he adds cautiously: "We are limited by our investment - we could be growing twice as fast. We are using retained earnings to fund the growth."

Revenues for 2003 will again show robust growth on 2002's $608 million and a continuing trend for the defence business, which generates 55% of revenues, to be gradually overtaken by the quicker growing commercial activity.

Arinc's communications and information technology expertise is spreading from airlines into new markets - notably airports and business jets. Surface transport and law enforcement agencies are other small but growing markets.

Belcher says: "We look for return on investment of 20%. Margins vary: for example, the US Department of Defense margin is set by the government at 5-9% depending on how good you are. But anywhere else we look at double digits."

One result of that is that not all technological avenues explored by Arinc prove immediately fruitful. In 2001 the company wrote off $28 million to leave disappointing areas.

Belcher declares, however, that he has no regrets and notes that at least two of them - the Dominion truck-tracking programme and the Pilot Mate tool for maritime tug crews - may yet yield results even though they are now on ice.

"As long as the board allows us freedom, which they have, then I am happy. We are going to grow this for the employees and management team and not put it at risk. The banks love us," he says.

Customers do too. Belcher continues: "We find that the quality of service we provide is key. If we don't live up to that quality of service then we have penalties in the contract and we will pay back. We have never lost a customer."

Supported by a senior management team largely built by himself over the last five years, Belcher sees a bright future ahead for Arinc but makes clear that both he and his team will have to perform to achieve that. At the top 39 US airports, for example, if Arinc's systems suffer a failure rate worse than one in 10 million then it loses money "big time".

Belcher says: "We have some pretty tough goals set by the board. [In 2003] we will hit 111% [of target]." With Lake nodding rueful assent next to him, Belcher concludes: "I'm a taskmaster. I like growth and there are a lot of negotiations with the vice-presidents. My energy hasn't diminished."

Source: Flight International