US-based EDO has grown substantially through acquisitions, racking up three purchases in 2005, and shows no sign of stopping, writes Helen Massy-Beresford. EDO, which specialises in armament carriage and release systems, communication and countermeasures, composite structures and engineering services, has moved up three places this year in the top 100 ranking by revenue, to number 67, after posting 2005 revenues of $648 million compared with $536 million a year earlier.
Unsurprisingly, the company scores highly when it comes to growth, securing its place as the 29th fastest-growing company in the survey.
The company has cash set aside for further expansion, says chief executive James Smith. Command, control, communications and computers and the intelligence sector are areas of focus, and that leaves it with a firm eye on the US market, but Smith does not rule out acquisitions in other areas.
One of the purchases the company made last year was in the composites domain and is designed to give it further inroads into the potentially lucrative unmanned air vehicle market. Fiber Innovation has the ability to make "very complex shapes, very efficiently, quickly and inexpensively", says EDO, adding the company gives it important access to the rapidly expanding UAV market, where there is increasing demand for this kind of work. "We anticipate that we will make more acquisitions in 2006," says Smith.
Opportunities in the communications sector are primarily focused on the USA. "We don't see applicability outside the USA at this time but, if we did, the first door we would knock on would be the UK's," he adds.
EDO has also recently agreed to acquire engineering services and weapons-systems analysis company CAS and intelligence specialist Impact Science & Technology, both of which are expected to add to the company's earnings in the second half of 2006.
Smith is confident of the company's prospects for the remainder of the year, despite a slip in deliveries in the first quarter. "Quarter 1 is always light - the fact that milestones have slipped means it is lighter than light," he says.
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| EDO has cash set aside for further growth, says chief executive James Smith |
Revenues slipped again in the second quarter, to $152.4 million, compared with $156.1 million in the same quarter last year, but profits edged up 3% to $6.3 million. The forecast for 2006 as a whole is for 5-7% growth over 2005 to revenues of $680-695 million. The company is predicting 8-10% organic revenue growth for next year.
As in previous years, a significant chunk of those revenues will be ploughed back into research and development projects. "R&D is our lifeblood. We spend a fair amount of our discretionary funds on R&D," Smiths says. "A number of the technologies we've invested in have become big programmes with good returns," he says.
A company-wide R&D committee annually reviews areas that are worthy of funding. In situations where there could be overlaps with other companies, EDO prefers to team up. It has recently won a contract with Denmark's Terma to supply ejector racks to the Danish air force.
The company is also keen to focus on technology which is exclusive. "We don't invest discretionary money to be like someone else - we make sure we don't do too many 'me toos'," says Smith, adding: "For good or for bad, the company is run by engineers so there's always going to be plenty of R&D budget."
Source: Flight International
