TIDMAVG
RNS Number : 5085A
Avingtrans PLC
30 September 2020
30 September 2020
Avingtrans plc
("Avingtrans" or the "Group")
Preliminary Results for the year ended 31 May 2020
Avingtrans plc, which designs, manufactures and supplies
critical components, modules, systems and associated services to
the energy, medical and industrial sectors, is pleased to announce
its preliminary results for the twelve months ended 31 May
2020.
Financial Highlights
-- Revenue increased by 9.5% to GBP113.9m (2019: GBP104.0m)
o Underlying revenue excluding acquisitions GBP96.4m, subdued
due to Covid-19
-- Gross Margin improved to 27.8% (2019: 26.6%)
-- Adjusted (2) EBITDA from continuing operations increased by
25.7% to GBP11.8m (2019(1) : GBP9.4m)
-- Adjusted (2) PBT increased to GBP6m (2019: GBP5.3m)
-- Adjusted (2) Diluted earnings per share were boosted to 16.9p (2019: 14.6p)
-- Net Debt excluding IFRS16 GBP7.4m (31 May 2019: GBP2.0m)
-- Dividend suspended due to Covid-19, intention to re-instate in FY21
-- Guidance reinstated for FY21 and FY22
(1) 2019 not restated for IFRS16
(2) Adjusted to add back amortisation of intangibles from
business combinations, acquisition costs and exceptional items
Operational Highlights
Energy
-- Revenue up 11% to GBP102.0m (2019: GBP91.9m), boosted by acquisitions in the period
-- Aftermarket performance continuing to improve across most business units, despite Covid-19
-- Bolt-on acquisitions of Booth Industries and Energy Steel completed during the period
o integrations of both went well during FY20, with each
delivering modest maiden profits for the group (net of costs)
despite both being distressed on acquisition.
-- Expanding orders in nuclear sector in the UK, USA and Asia
-- Booth has a record order book, including the GBP36m HS2 doors order just received
-- HT China won a GBP2.2m pump order for a concentrated solar power plant in Dubai
-- Post period end, obtained Outline Planning Permission (OPP)
for the redevelopment of Hayward Tyler Luton site, comprising 1,000
residential units
-- All factories have adapted to new operating conditions and contained the CV19 disruption
Medical
-- Revenue flat at GBP11.9m (2019: GBP12.1m), transition to new markets continues
-- Scientific Magnetics and Tecmag working with their partners
to produce new product and service offerings for the MRI and NMR
markets
-- Focus on new markets and products, esp. compact MRI, with a "sustain" strategy elsewhere
-- Composite Products performance was again stable in the period, with good prospects.
C ommenting on the results, Roger McDowell, Chairman, said:
"Despite the headwinds produced by the Covid-19 pandemic, it has
been a solid year for the Group, with record numbers in terms of
orders, revenue and profit, supported by the recently acquired
businesses, Booth Industries (UK) and Energy Steel (USA). Both of
these acquisitions performed acceptably in their first year with
the Group and recent order wins have reinforced our view that both
will create significant shareholder value in due course, as they
respond to our now well-proven Pinpoint-Invest-Exit strategy (PIE).
The former Hayward Tyler Group (HTG) businesses performed well in
the year, despite Covid-19 issues, including: temporary factory
closures, delayed orders and supplier parts delays. Ormandy and
Crown had challenging times due to the crisis. Oil and gas capex
spending was much reduced, but we were able to absorb this and the
Covid-19 effects within the overall results.
The Energy divisions and their management teams have managed the
crisis well and we continue to focus on profitable growth, to build
valuable businesses. Nuclear life extension and decommissioning
arenas remain good hunting grounds for us and overall order intake
has been pleasing so far in the new financial year. Our nascent
medical division continues to make steady progress, as it develops
new products, notably for MRI applications. We will continue to
concentrate on high margin aftermarket opportunities in all our
businesses. Brexit, tariff wars and Covid-19 are all unwelcome
disruptions, but we will maintain our well-planned course. We
remain positive about our prospects in both Energy and Medical and,
with our strong Balance Sheet, we have the resources to support our
agility, enabling us to seize any opportunity'.
Enquiries:
Avingtrans plc 01354 692391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
N+1 Singer (Nominated Adviser) 02074 963000
Shaun Dobson/Alex Bond (Corporate Finance)
Rachel Hayes (Corporate Broking)
Newgate (Financial PR) 02076 539850
Adam Lloyd/ Tom Carnegie
About Avingtrans plc:
Avingtrans designs, manufactures and supplies original
equipment, systems and associated aftermarket services to the
energy, medical and industrial markets worldwide.
Business units
Hayward Tyler - Luton & East Kilbride, UK and USA, China and
India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Energy Steel, Inc - Lapeer, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising
in: OEM parts obsolescence; custom fabrications; engineering
design solutions; product refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK and Chengdu, China
Provider of safety-critical equipment for the energy, medical,
science and research communities, worldwide, specialising in
precision pressure and vacuum vessels and associated fabrications,
sub-assemblies and systems.
Booth Industries - Bolton, UK
Designs, manufactures, installs and services doors and walls
which can be tailored to be: blast &explosion proof; fireproof;
acoustically shielded; high security/safety; or combinations
of the above
Ormandy Group, Bradford, UK
Design, manufacturers and servicing of off-site plant, heat
exchangers and other HVAC (heating, ventilation and air conditioning)
products
Peter Brotherhood - Peterborough, UK
Specialises in the design, manufacture and servicing of performance-critical
steam turbines, turbo gen-sets, compressors, gear boxes and
combined heat and power systems.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving
customers in industrial markets.
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and
associated cryogenics for a variety of markets including MRI
and provides services for Nuclear Magnetic Resonance instruments.
Tecmag Inc, Houston, USA
Designs, manufactures and installs instrumentation, including
consoles, system upgrades, and probes, mainly for Magnetic Resonance
Imaging (MRI) and Nuclear Magnetic Resonance (NMR) systems.
Chairman's Statement
Notwithstanding the effects of Covid-19, it has been a year of
solid progress at Avingtrans in FY20, with record adjusted EBITDA
and revenue boosted by acquisitions. Although the pandemic had some
adverse impacts on most of our businesses in the year (notably on
order timing - starting in our China units in February 2020), we
have been able to make headway, nonetheless. It is also pleasing to
note a number of important new order wins, post-period end, which
have provided a degree of catch-up for FY21, following delays
through the lockdown period.
Under the Pinpoint-Invest-Exit ("PIE") strategy the assets of
Booth Industries in Bolton, UK and Energy Steel in Michigan, USA
were acquired in June 2019. Both of these turnaround opportunities
were purchased following agile due diligence processes. The two
businesses augment our capabilities in the nuclear sector and Booth
brings Avingtrans into the wider Critical National Infrastructure
(CNI) market. The acquisition of Energy Steel broadened Hayward
Tyler's product offering - particularly in solutions for "orphan"
OEM components for the nuclear aftermarket - and provides
cross-selling opportunities. Acquiring Booth Industries has enabled
the Process Solutions and Rotating Equipment ("PSRE") division to
expand its product and service offering and deepen its
relationships with its existing customers. Both businesses have
integrated well, delivering modest profits (before transaction
costs) in their maiden year with the Group.
The divisional management teams have shown themselves to be
adaptable and resilient in the period, continuing to build upon
solid business platforms, despite the disruptions due to Covid-19
('CV19)'. These effects have caused us to make certain targeted
changes, such as closing the Crown site and relocating the residual
assets into Metalcraft. However, our focus remains on growing
formidable and valuable businesses.
Aftermarket growth in EPM and PSRE remains central to developing
robust value propositions, in order to support OEM and end-user
customers. This improved end-user access model not only provides a
more predictable and repeatable pipeline, which in turn drives
improved profitability, but also boosts product and service
development. We are particularly keen to maximise the revenue
opportunities arising from the aftermarket access afforded by
recent acquisitions (eg Energy Steel) and though recent partnership
deals (eg with Shinhoo Pumps, China).
The Engineered Pumps and Motors (EPM) division delivered an
acceptable result for the year given the backdrop, as it suffered a
series of CV19 disruptions, first in China, then in the UK and USA
and finally in India. The impacts included delayed orders, supply
chain delays and customer delivery issues, so a broadly flat result
was no mean feat. Energy Steel helped to boost the revenue for the
division and made an underlying modest contribution to profit,
which is promising for the future, considering the backdrop of its
first year with the Group. The post-period end award of outline
planning permission for the HT Luton site was welcome news,
providing us with the opportunity to optimise HT's UK operations,
whilst potentially producing a net surplus for the Group when the
site is exited in due course.
The PSRE division pushed through CV19 effects, in part thanks to
a gratifying performance by Peter Brotherhood, although we have
seen order delays in this division also. The division is now
refining its offering to the UK nuclear market - especially to
Sellafield for nuclear decommissioning - whilst also using this
capability to position for longer term new nuclear technologies.
Ormandy had a trickier year, due to Covid-19 induced construction
market delays, but is now getting back on track. The integration of
Booth has gone well so far, with a record order book and a modest
initial profit being satisfactory first steps on the journey to
recovery.
Meanwhile, the Medical and Industrial Imaging (MII) division
continues to progress steadily, with both the UK and Chinese
businesses performing acceptably. This is a division in transition,
where Scientific Magnetics and Tecmag are working with their
partners to produce new product offerings for the MRI and NMR
markets. While these developments are still at a relatively early
stage, the Board is excited about the long-term potential of the
division which is expected to yield longer term positive returns
for the Group, albeit perhaps using a different vehicle to maximise
returns than our usual "PIE" process for mature businesses.
Whilst the results for the Group were solid as a whole, the
Board considers that it is prudent to continue to preserve cash and
will not propose a final dividend this year. In the context of the
global pandemic, the resulting need for targeted restructuring and
having made some use of government support schemes, we believe that
shareholders will consider that this is the right thing to do. All
being well, we intend to return to our commitment to long term
shareholder returns in FY21. Our resilient view of the prospects
for the Group, underpinned by our prudent approach to debt and
financial headroom, further support this decision. Given the
strength of the order book, we are reinstating guidance.
Finally, since the last annual report, Graham Thornton retired
from the Board, having served with distinction for 10 years with
the Group. The Board and I wish Graham every success with his
future endeavours and thank him for his hard work and dedication
whilst he was with us. I warmly welcome all of the staff in recent
acquisitions to Avingtrans and congratulate them and all Avingtrans
employees for the spirit and hardiness they have displayed in
recent, challenging months. On behalf of the shareholders, I thank
all Avingtrans employees for their dedication to the Group during
the past year, as we look forward with watchful enthusiasm to
FY21.
Roger McDowell
Chairman
29 September 2020
Strategy and business review
Group Strategy
Our core strategy is to buy and build engineering companies in
niche markets, particularly where we see turnaround and
consolidation prospects; a strategy we call Pinpoint-Invest-Exit
("PIE"). We have had a strong track record in returning significant
shareholder value over the past decade and FY20 was another
successful year, with the June 2019 acquisitions of Booth
Industries (UK) and Energy Steel (USA) being successfully
integrated into the group.
With an increased presence in our target markets, a focus on the
aftermarket, strength in depth of the management teams and a lean
central structure, the Group continues to grow profitably -
notwithstanding the recent buffeting by Covid-19 - and the Board
has renewed its focus on seeking additions to the Avingtrans
value-add proposition.
The majority of the Group's adjusted key financial metrics
trended positively in the period, allowing for Covid-19 and the
effects of acquiring two underperforming businesses during the
year.
The business is focused on the global Energy and Medical markets
, both of which play into some of the world's mega-trends, such as:
continued urbanisation; an ageing population; and an accelerating
transition towards a cleaner and healthier planet.
Divisional Strategies
Engineered Pumps and Motors (Energy - EPM): EPM continues to
develop its nuclear installed base (civil, defence and national
security) - notably for life extension applications - and its
offering to the hydrocarbon market sectors. This strategy was
bolstered by the acquisition of Energy Steel in North America,
which specialises in nuclear life extension. In addition, the EPM
business continues to develop solutions for new nuclear
technologies and other low carbon energy sources, such as
concentrated solar, to capitalise on the global energy supply
transition. During FY20 EPM secured a number of key contracts,
including the provision of pumps for the global fusion reactor
project ("ITER") in France and pumps for a major new concentrated
solar power plant in Dubai.
Process Solutions and Rotating Equipment (Energy - PSRE): Here,
the primary strategy is to develop a comprehensive offering to the
nuclear decommissioning and reprocessing markets, building on the
long-term contracts to build nuclear waste storage containers and
the installed base of equipment across the vast Sellafield site. In
parallel, to continue to support the nuclear submarine fleet and
facilities for the UK MOD and targeted opportunities in the equally
highly regulated offshore Oil & Gas markets. During the year,
the division's nuclear credentials were boosted by the acquisition
of the assets of Booth Industries, which also broadened our market
reach into Critical National Infrastructure (CNI) and national
security in general. The division completed the exit from the Crown
site near Bristol and integrated the residual assets into
Metalcraft, following continued order delays in its historic
products.
Medical and Industrial Imaging (Medical - MII): The focus for
the medical division is to become a niche market leader in the
production of high integrity components and systems for medical and
scientific equipment manufacturers including MRI medical imaging,
proton therapy and Nuclear Magnetic Resonance (NMR).
The common theme which we are seeking to exploit across the
energy and medical divisions, is the continued pressure on
aftermarket expenditure, where operational efficiency, reliability
and safety are paramount and operators are looking to their supply
chain partners to provide long term support of infrastructure and
legacy installations.
Pinpoint-Invest-Exit
Continuing our Pinpoint-Invest-Exit strategy, Avingtrans added
two bolt-on acquisitions in the year, being Booth and Energy
Steel.
In June 2019, the Company announced the acquisition of certain
of the assets of Bolton-based Booth Industries Limited, a leading
UK engineering company, for a consideration of GBP1.8m, from the
administrators of AIM-quoted Redhall Group plc ("Redhall"). The
acquisition included a freehold site valued at GBP1.25m.
Additionally the Group also acquired the brand name and selected
assets of Jordan Manufacturing for GBP40k, a provider of specialist
manufacturing and fabrication services and another division of
Redhall, in August 2019, which strengthened Metalcraft's position
as a key player in the nuclear supply chain.
Pinpoint-Invest-Exit (continued)
Also in June 2019, the Company acquired US-based Energy Steel
& Supply Co. (Energy Steel), an established manufacturer of
machined products and components to the civil nuclear power
industry. US-based Energy Steel was acquired by Avingtrans for a
consideration of $0.6m. Hayward Tyler has over 600 pumps in active
service in nuclear applications across the world and this
acquisition expands the Company's nuclear capabilities and product
lines for new and existing customers.
The integrations of Booth and Energy Steel both went well during
FY20 and they were each able to deliver modest maiden profits for
the group, despite both being in distressed positions when they
were acquired. This is all the more pleasing, given the headwinds
generated by the global pandemic.
Post period end, we obtained Outline Planning Permission (OPP)
for the redevelopment of our HT Luton site, comprising up to 1,000
residential units. Whilst it is too early to say what the value of
the site may become, we believe that there should be ample headroom
to relocate HT to a new site and deal with any exit costs, whilst
still leaving a material net surplus.
Although M&A activity in energy capital goods markets has
been somewhat inhibited by Covid-19, businesses like ours continue
to command high valuations. Avingtrans remains confident about the
current strategic direction and potential future opportunities
across its chosen markets.
Markets - Energy
The global demand for energy has temporarily stopped growing,
due to Covid-19, but we believe that we will see a return to growth
from next year and the effect of the pandemic may be to drive
faster towards increased efficiency and decarbonisation. This trend
may benefit our businesses in the nuclear and renewables
sectors.
End User/Aftermarket
Operators and end-users are demanding a blend of quick response
through local support with a requirement to drive improvements
through equipment upgrades and modernisation. In the West, where
facilities are being operated for longer than their intended design
lives - and often in a drive for increased capacity alongside
tougher regulations - there is a strong demand for solution
providers in the supply chain to partner with end-users for the
longer term. The Avingtrans energy divisions are well positioned to
grow in this end-user market space.
Nuclear
Nuclear energy as a low carbon, baseload power source remains an
asymmetric market with respect to future growth. Almost all of the
1GW+ new build opportunities are currently in Asia, with the
exception of the limited UK programme. However, we are still
enjoying buoyant market segments, including supporting the
operational fleet, continued safe operation and life extensions,
decommissioning and reprocessing. We are also working on the
long-term development of the next generation of technologies - i.e.
Small Modular (SMR), or Advanced Generation IV Reactors. In
addition, these segments all have the backdrop of a consolidating
supply chain and paucity of expert knowledge.
The USA still operates the biggest civil nuclear fleet in the
world, with 95 reactors generating more than 30 percent of the
world's nuclear electricity. When coupled with the heritage
Westinghouse technology operating in Europe and Asia, the EPM
division's long-standing position in this market provides fertile
ground for further growth. Obsolescence and life extension are key
issues for nuclear operators worldwide and the Avingtrans Energy
Divisions are well positioned to support operators in addressing
this critical risk. The acquisition of Energy Steel in the USA has
bolstered the Group's capabilities in this regard.
The UK remains pre-eminent when it comes to decommissioning and
reprocessing, in terms of innovative technology and overall spend.
The Group is embedded in the future manufacture of waste containers
for Sellafield and will continue to expand its presence in the UK
and globally in the longer term. The development of new nuclear
technologies is ongoing, with pockets of activity in the UK, South
Korea, the USA and China dominating development activity. The Group
views these new technologies as an attractive route forwards for
nuclear and is well positioned to develop as a global industry
partner.
Power Generation
The world continues to electrify, with an increasing amount of
primary energy going to the power sector, which remains a key focus
across the Group's energy divisions. Aside from nuclear, as
discussed in the previous section, the main sub-sectors are as
follows:
-- Coal - the Group continues to see good aftermarket activity
from coal fired power stations even though the demand for new power
stations is in decline. Opportunities still exist in India, China,
South East Asia, Eastern Europe and the Middle East. EPM is
optimising its product line, to take market share and to create
tomorrow's aftermarket.
-- Gas - natural gas, primarily in the form of combined cycle
gas turbine power plants is a growing market space, primarily in
the West. The Group is moving into this market with both existing
and new product lines.
-- Renewables - renewable technologies and their supporting
infrastructure are a growing market globally. The Group has a broad
range of products that can be applied directly to this market
segment and also has expertise that can be used to develop new
products for niche parts of this market, such as molten salt for
concentrated solar applications.
Hydrocarbons
At the start of FY20, we had begun to see relatively more orders
in this sector, although our forecasts were deliberately cautious,
given the recent years of weak prices, low capital expenditure,
portfolio realignments and productivity efficiencies. However,
Covid-19 has had a dramatic effect on oil and gas supply and
demand, with Brent crude now trading in the range of $40 to $45 per
barrel, with most informed forecasts suggesting a slow and modest
recovery over time. The result is that new capital expenditure in
this sector has been materially reduced, meaning that our forecasts
must continue to err on the side of caution, with some limited
restructuring activity in EPM being necessary, due to the time lag
we can expect before any sector recovery. However, aftermarket
orders continue to be won, so there is some positive news in this
area.
Digitalisation & Condition Monitoring
Companies across the energy market continue to invest in digital
technologies to improve productivity, efficiency and predictability
in the field. At the equipment level this translates to a series of
devices, sensors and algorithms which can predict breakdowns before
they occur and ensuring equipment is running at its optimum
performance. The Group launched its first monitoring product,
DataHawkTM, for Boiler Circulating Pumps two years ago and is
building on this success by adding this capability to both a wider
set of original equipment and its aftermarket service offering.
Markets - Medical
The Diagnostic (medical) and molecular imaging markets are large
global sectors, dominated by a few large systems manufacturers. The
total Diagnostic Imaging Market will be worth $33.5bn by 2024,
according to Markets and Markets and is expected to continue to
grow at over 5% per annum over that period. The largest market is
the USA, followed by Europe and Japan. The fastest growing markets
are China and India.
The Avingtrans Medical division is primarily targeting the
Magnetic Resonance Imaging (MRI) and Nuclear Magnetic Resonance
(NMR) segments of these markets, due to the common thread
requirements for superconducting magnets and cryogenics. These two
segments account for approximately 85% of our business in the
medical division. Market drivers for these segments include an
ageing global population and the global pharmaceutical industry's
research needs. MRI itself is approximately 18% by value of the
total diagnostic Imaging market and is projected to grow at 6% p.a.
(Grand View Research). NMR is a smaller market, currently estimated
at $861m p.a. by Marketwatch and is projected to grow at over 3%
p.a. until 2026, with Bruker enjoying a dominant market share.
End User/Aftermarket
The MRI market segment is dominated by a handful of
manufacturers, including GE, Siemens and Philips, who account for
circa 80% of revenue globally. These players also dominate the
aftermarket, though there are a few independent MRI service
businesses in existence. Avingtrans is not present in the MRI
aftermarket at this time.
The NMR market is similar, currently dominated by Bruker and
Jeol. Avingtrans is aligned with MR Resources Inc, a
well-established US business, which services the NMR aftermarket.
The Avingtrans Medical division is well positioned in this end-user
market space and is winning service contracts with European NMR
users, following our partnership agreement with MR Resources.
MRI
As noted above, the MRI market segment is dominated by a handful
of global manufacturers. For component and sub-system supply,
Avingtrans is most aligned to the market leader, Siemens and also
to Canon, which acquired the Toshiba MRI business in recent years.
As far as full system supply is concerned, we are currently
investigating a number of niche MRI applications (e.g. veterinary
imaging) and their associated routes to market, with the intention
of pinpointing the most promising of these for future investment,
to bring novel products to market.
NMR
We are aligned with recent market entrant Q One Instruments,
China and also with MR Resources of the USA, as noted above.
Together, we form an alliance to challenge the dominance of the
existing players and to provide customers with an additional source
for NMR products, service and support. Former NMR customers of
Agilent (formerly Varian) are also being given much needed support.
Although hampered towards the end of the period by Covid-19, we
have been successfully winning support contracts for end users and
the prospect list for Q One Instruments is growing slowly. After
acquiring Tecmag Inc in Houston in October 2018, to add software
and electronics capabilities to our NMR/MRI systems, we then
acquired some assets from Acorn NMR in California, to transfer to
Tecmag and to broaden our NMR service offering into end-user sample
analysis and characterisation. This initiative has had some modest
success in its first year of activity.
Operations
Operational Key Performance Indicators (KPI's)
KPI 2020 2019
Percentage of total continuing revenue deriving
from aftermarket (AM) sales (%) 44.7 46.2
Customer quality - defect free deliveries (%) 98.2 98.0
Customer on-time in-full deliveries (%) 80.1 87.2
Annualised staff turnover including restructuring
(%) 13.7 13.0
Health, Safety and Environment incidents per head
per annum 0.08 0.10
The AM sales % figure was slightly down year-on-year, as CV19
delays affected AM order timings - especially at EPM, in the
nuclear aftermarket. For customer quality, we sustained our usual
high level of defect free deliveries, though on time deliveries
fell back in the year. This was partly due to the initially poor
delivery performances at Booth and ES after acquisition, but also
latterly affected by CV19 supply chain delays. Annualised staff
turnover was also relatively static, with more stable staff
positions in EPM and PSRE overall being challenged by CV19
restructuring - eg the closure of the Crown site. The long-term
positive reduction of HSE incidents is welcome, albeit that each
new acquisition (Booth & ES) presents us with new HSE
challenges.
EPM Division - Energy
For the EPM division, which represents the bulk of the former
Hayward Tyler companies, the main priorities remain to strengthen
the aftermarket capabilities and to maximise opportunities in the
nuclear life extension market.
The division's results were disrupted by CV19 in H2, first in
China, then in the UK and the USA and finally in India. Underlying
revenues were down year on year, but boosted by ES, although the
corresponding ES effect on profit was not material.
At HT Luton, aftermarket activities continue to build, including
the servicing of third party equipment, albeit disrupted by the oil
and gas market reversal. The GBP10m contract in Sweden with
Vattenfall for the Forsmark plant (for nuclear life extension) is
proceeding to plan, whilst further defence orders have been
received and are being executed on target. Following the receipt of
planning permission to develop the HT Luton site into up to 1,000
dwellings, plans are underway to move the business to a new,
optimised location.
HT Inc in Vermont (USA) continues to see solid order intake in
the nuclear life extension market in the USA - and again with KHNP,
South Korea, post-period end, although delays in order intake due
to CV19 did impact the US results. HT Inc's new R&D
opportunities - in next generation nuclear power and concentrated
solar power - are also making good progress. The business won its
first order for the experimental nuclear fusion reactor "ITER"
currently under construction in France.
HT Kunshan (China) is fully operational following CV19
disruption and won their biggest ever contract in China (worth
GBP2.2m) in the period for specialist pumps to be installed in a
major new concentrated solar power plant in Dubai. This marks an
important diversification into the renewables market and we expect
more to follow in the coming years.
HT India suffered order and delivery delays and disruptions in
H2 of the period, but is now coming back to "normal".
Energy Steel ('ES') in Michigan (USA), is integrating and
recovering well, with the HT team focusing on customer service
excellence under a new general manager and expanding the sales
footprint in nuclear aftermarket opportunities in north America and
beyond. Cross-fertilisation projects are being successfully won
between HT and ES.
PSRE Division - Energy
PSRE steamed ahead in FY20, thanks in large part to a mature
performance by Peter Brotherhood. The focus on aftermarket
underpinned the PB result for the period, improving the overall
PSRE margin mix, as well as successful shipments of floating
production platform steam turbines.
Elsewhere, the division had a generally positive year, allowing
for CV19 disruptions to supply chains and deliveries, except at
Crown, where the weight of the disruption proved to be too much for
this small business unit. Therefore, we took the decision to close
the separate Crown site near Bristol and relocate the residual
assets to Metalcraft.
Metalcraft's progress with the Sellafield 3M3 boxes has been
steady, despite customer design changes, and we are producing boxes
consistently. The next 3M3 box contract tender was expected in this
calendar year, but has now been even further delayed due to
Covid-19 disruptions to Sellafield's plans. Whilst this is
disappointing, we are well organised to pursue this contract later
and it does not impact on our forecasts, which allow for unexpected
customer delays.
Ormandy's performance was promising in the first half, but it
was derailed by CV19 construction market disruptions in H2.
However, recent indications are that orders are rebuilding, giving
us renewed hope for the HVAC sector in FY21.
Since its acquisition in June 2019, Booth Industries has been on
an express recovery curve and has responded well to the proven
Avingtrans PIE methods. A record order book underpins operations
for FY21 and beyond. We rationalised the operations to remove
unneeded space, as well as planning a new extension to the Nelson
Street facility in Bolton, albeit that CV19 has delayed this
expenditure for a time. The blast and security high integrity doors
niche which Booth occupies is one which we can defend vigorously,
to rebuild Booth into a leader in its chosen markets.
The Fluid Handling business in Scotland is a consistently good
performer and has fitted well into our ambitions to build a wider
nuclear capability. Post-period end, this unit won its biggest ever
order (GBP2.5m) for Sellafield, to repair and upgrade remotely
monitored valves. Further life extension and decommissioning
opportunities are being pursued.
MII - Medical Division
MII is a division in pro-active transition. We have been
pivoting away from the custom business previously targeted by
Scientific Magnetics (SM) and working towards new products in
Magnetic Resonance Imaging (MRI) and Nuclear Magnetic Resonance
(NMR), including service and support offerings with our third party
partners. The division was less disrupted in the year than other
divisions, apart from the Metalcraft China factory, which was
forced to shut for several weeks in February and March 2020.
Our potentially exciting new product developments are taking
time to bear fruit, but we are slowly making progress. The prior
year acquisition of Tecmag in the USA was strategically important.
Tecmag produces electronics and software for MRI and NMR systems.
It is an important piece in the jigsaw, facilitating our ability to
produce complete MRI and NMR systems. Tecmag is operating at close
to break-even with legacy product sales, whilst working with
Scientific Magnetics on the products of the future. The strategy
for SM and Tecmag requires further investment and patience before
we see the results (notably in the MRI market) but the potential
rewards are great enough for us to embark on this journey with
enthusiasm.
Metalcraft's UK business with Siemens for MRI components was
positive, but progress in China with other customers such as
Alltech and QOne, was quite disrupted by Covid-19 induced delays,
so we produced less revenue than anticipated at this unit for the
year and made a loss for the year in consequence.
Composite Products was also disrupted by Covid-19 in H2, though
here, the effects were not material and the unit is operating
normally again, with our key customer Rapiscan increasing
deliveries to the package scanning market. Other smaller accounts
also supported revenues, with good prospects in the pipeline.
Financial Performance
Adoption of IFRS 16
The Group has adopted IFRS 16 at 1 June 2019. Adoption of IFRS
16 has led to a number of changes in the way the Group recognises
right-of-use assets and a related lease liability in connection
with all former operating leases except for those identified as
low-value or having a remaining lease term of less than 12 months
from the date of initial application .
The Group has applied IFRS 16 using the modified retrospective
method, as a result there is no adjustment to the opening retained
earnings at 1 June 2019. The comparative information has not been
restated and continues to be reported under IAS17. A right-of-use
asset of GBP9.7m mainly for operational premises has been
recognised with a matching lease liability increasing net debt in
the year.
Key Performance Indicators
The Group uses a number of financial key performance indicators
to monitor the business, as set out below.
Revenue: 9.5% increase driven by acquisitions
Overall Group continuing revenue increased to GBP113.9m (2019:
GBP104.0m), driven by the effect of the additional revenues at
Booth and Energy Steel offsetting some delayed contracts due to
wider CV19 effects. Underlying revenue excluding acquisitions
reduced to GBP96.4m with CV19 delays impacting most significantly
in EPM.
Profit margin: further significant improvement in results,
despite CV19
Adjusted EBITDA (note 2) increased by 25.7% to GBP11.8m (2019:
GBP9.4m) with further progression from the underlying businesses
and with the recent acquisitions adding a modest contribution.
Adjusted EBITDA benefited from IFRS16 by GBP1.5m, excluding this
Adjusted EBITDA would have increased to GBP10.3m, a 9.9%
increase.
Operating profit was GBP4.1m (2019: profit GBP3.6m) with the
underlying profit subdued by GBP1.2m of amortisation of acquired
intangibles at Energy Steel principally the acquired Order
Book.
Gross margin: solid progress continues
Group gross margin improved to 27.8% (2019: 26.6%) mainly due to
the improving gross margin mix from the former HTG business units,
as our transformation programme reaches maturity there.
Tax: future profits and cash protected by available losses
The effective rate of taxation at Group level was a 20.9% tax
charge. A tax refund (note 4) due in the US kept the charge lower
than expected. A charge arising from the reversal in the recognised
rate on UK deferred tax from 17 to 19% increased the effective tax
rate by 2.2%. The tax position will be aided in the coming years by
utilisation of losses in the UK and China. We continue to be
cautious, not recognising all of the potential trading tax losses
in the UK.
Adjusted diluted Earnings per Share (EPS): a 15.3%
improvement
Adjusted diluted earnings per share from continuing operations
improved to 16.9p (2019: 14.6p) and Adjusted diluted earnings per
share attributable to Shareholders improved to 16.2p (2019:
14.9p).
Basic and diluted earnings per share attributable to
Shareholders reduced to 4.4p (2019: 8.0p) and to 4.3p (2019: 8.0p)
respectively primarily due to the additional impact of the first
year amortisation of ES business intangibles and costs of closing
the Crown facility.
Funding and Liquidity: net debt remains well under control
Net debt (including IFRS16 debt) at 31 May 2020 was GBP16.3m (31
May 2019: net debt: GBP2.0m after GBP9.7m from the adoption of
IFRS16 at 1 June 19, total GBP11.7m). Excluding IFRS16 debt at 31
May 2020 was GBP7.4m (31 May 2019: net debt: GBP2.0m). Cash
generation was subdued by a GBP6.4m working capital outflow, partly
due to the envisaged working capital outflow required for
acquisitions GBP3.2m, the timing of contracts and an expected
reversal of the skew from advance payments on accounts noted in the
prior year (2019 inflow GBP9m). Additionally the Group invested an
initial GBP1.5m net cash cost for the ES acquisition and the Booth
trade and assets. The Directors consider that the Group has more
than sufficient financial resources to deliver its short to medium
term strategic objectives and is maintaining a strong relationship
with its banking partners.
Dividend: suspended due to CV19
The Board considers that it is prudent to continue to preserve
cash and not to propose a final dividend this year. In the context
of the on-going global crisis, the resulting need for targeted
restructuring in the Group and having made some use of government
support schemes, we believe that shareholders will consider that
this is the right thing to do. All being well, we intend to return
to our commitment to long term shareholder returns via dividends in
FY21.
People
At Board level, the only change in the period was that Graham
Thornton retired from the Group in November 2019. Graham joined the
group as a Non-Executive Director in September 2009. Within the
Group structure, Colin Elcoate resigned from his position as the
Chief Commercial Officer for Avingtrans, to take up a CEO role
elsewhere. The Board wish Graham and Colin all the best in their
future chosen careers. Top level divisional management teams were
largely unchanged.
In a broader sense, the management teams in each of the three
divisions continue to be strengthened, with a number of key
appointments being made in the year - and with emphasis on the
importance of the aftermarket opportunities. Skills availability is
always a challenge, but we do not expect to be unduly constrained
by shortages, given the current global economic situation.
Avingtrans continues to invest significant effort in developing
skills in-house, both through structured apprenticeship programmes
and graduate development plans. The Group continues to be
recognised nationally for the strength of its apprenticeship and
graduate training schemes, including winning a Queen's Award for
Enterprise at Metalcraft in the period.
Our global workforce is becoming more integrated and this
provides additional capability, capacity and innovative thinking
around the clock, to support our global blue-chip customer
base.
Health, Safety and Environment (HSE)
The Group takes HSE matters and its related responsibilities
very seriously.
As regular acquirers of businesses, we find different levels of
capability and knowledge in different businesses. Often, a key
investment need in smaller acquisitions is to spread HSE best
practice from other Group businesses and bring local processes up
to required standards. Larger acquisitions (eg like HTG previously)
have well developed HSE practices and we seek to learn from these
in other business units.
Health and Safety incident reporting has improved across the
Group and incident trends have generally been improving over recent
years. Near miss reporting and knowledge exchange is also
positively encouraged, to facilitate learning and improvement. At
Board level, Les Thomas has HSE oversight and he conducts
inspections with local management as appropriate.
The Group's environmental policy is to ensure that we understand
and effectively manage the actual and potential environmental
impact of our activities. Our operations are conducted such that we
comply with all legal requirements relating to the environment in
all areas where we carry out our business.
During the period covered by this report, the Group has not
incurred any significant fines or penalties, nor been investigated
for any significant breach of HSE regulations.
Covid-19 has become the biggest health and safety issue for the
Group, along with everyone else. Fortunately, the nature of our
products and the topography of our factories have given us a good
base to work from, to make our workplaces Covid-19 safe. We have an
overall set of guidelines to work to, derived from government
policies around the world and local teams in each business adapt
these to the specifics of their individual site. These measures
include:
-- Shielding of vulnerable employees
-- Working from home where feasible
-- Factory and office re-layouts to facilitate social distancing
-- Enhanced cleaning and site hygiene
-- Additional use of PPE equipment where necessary
-- Minimisation and careful management of third-party visitors to our sites
Where our employees have to visit other third party sites, they
have protocols from their business unit to follow and must also
adhere to the policies and procedures of the site which they are
visiting.
Each business has a team responsible for ensuring that the
Covid-19 plan is kept up to date and adapted, if required, as the
circumstances of the pandemic evolve.
Taken as a whole, these measures have allowed us to operate at a
high level of effectiveness throughout the pandemic and ensured
that we have minimised any loss of output, whilst keeping employees
safe.
Social Responsibility
It is paramount that the Group maintains the highest ethical and
professional standards across all of its activities and that social
responsibility should be embedded in operations and decision
making. We understand the importance of managing the impact that
the business can have on employees, customers, suppliers and other
stakeholders. The impact is regularly reviewed to sustain
improvements, which in turn support the long-term performance of
the business. Our focus is to embed the management of these areas
into our business operations, both managing risk and delivering
opportunities that can have a positive influence on our
business.
Employees
The Group places considerable value on the involvement of its
employees and has continued to keep them informed on matters
affecting them directly and on financial and broader economic
factors affecting the Group. The Group regularly reviews its
employment policies. The Group is committed to a global policy of
equality, providing a working environment that maintains a culture
of respect and reflects the diversity of our employees. We are
committed to offering equal opportunities to all people regardless
of their sex, nationality, ethnicity, language, age, status, sexual
orientation, religion or disability. We believe that employees
should be able to work safely in a healthy workplace, without fear
of any form of discrimination, bullying or harassment. We have
begun to roll-out a "dignity and respect" training program across
the Group. We believe that the Group should demonstrate a fair
gender mix across all levels of our business, whilst recognising
that the demographics of precision engineering and manufacturing
remain predominantly male, which is, to an extent, beyond our
control.
Ethical policy
The Group complies with the Bribery Act 2010. We do not tolerate
bribery, corruption or other unethical behaviour on the part of any
of our businesses or business partners in any part of the world.
Employee training has been completed in all areas of the business
to ensure that the Act is complied with.
Outlook
Avingtrans is a niche engineering market leader in the Energy
and Medical sectors, with a successful profitable growth record,
underpinned by our 'PIE' strategy. Recent acquisitions will provide
further opportunities for the Group to build enduring value for
investors in resilient engineering market niches. We will continue
to be frugal and seek to crystallise value and return capital when
the timing is right, as part of the PIE strategy implementation. We
believe that our PIE strategy has served us well in the current
crisis and could result in further opportunities to grow
shareholder value.
The Group continues to invest in its three divisions, with a
focus on the global energy and medical markets, to position them
for maximum shareholder value via eventual exits in the years to
come. The integrations of Booth and Energy Steel are proceeding to
plan, as demonstrated by the results in the period. Our value
creation targets continue to be accomplished as planned and are
underpinned by a conservative approach to debt, which is important
during the crisis.
The energy divisions have a strong emphasis on the thermal
power, nuclear and hydrocarbon markets and aftermarkets. The
medical division continues to focus on high integrity components
and systems for leading medical, industrial and scientific
equipment manufacturers. To drive profitability and market
engagement, each division has a clear strategy to support end-user
aftermarket operations, servicing their own equipment and that of
pertinent third parties, to capitalise on the continued market
demand for efficient, reliable and safe facilities.
The on-going disruption caused by the pandemic is now our
biggest uncertainty. However, we have taken rapid and effective
cost mitigation actions so far, in order to limit any downside and
we will continue to be on our guard. We are also vigilant
concerning Brexit, but here we are not overly concerned, since our
direct EU exposure is relatively limited and we have taken
appropriate evasive actions in our supply chains, with likely
further such actions to follow, depending on the exact nature of
the eventual Brexit outcome.
Our markets continue to develop, despite Covid-19 and M&A
opportunities remain a priority for us. Businesses like ours can
command high valuations at the point of exit. The Board remains
guarded, but confident about the current strategic direction and
potential future opportunities across our markets. We will continue
to refine our business by pinpointing specific additional
acquisitions as the opportunities arise, to build businesses which
can create superior shareholder value, whilst maintaining a prudent
level of financial headroom, to enable us to endure any subsequent
headwinds, whether deriving from Covid-19, or otherwise.
The Strategic Report was approved by the Board on 29 September
2020 and signed on its behalf by:
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
29 September 2020 29 September 2020 29 September 2020
Consolidated Income Statement
for the year ended 31 May 2020 Note 2020 2019
GBP'000 GBP'000
Revenue 1 113,913 104,044
Cost of sales (82,284) (76,349)
--------- ---------
Gross profit 31,629 27,695
Distribution costs (4,931) (4,599)
Other administrative expenses (22,557) (19,477)
--------- ---------
Operating profit before amortisation of acquired intangibles, other non-underlying items
and
exceptional items 7,051 5,796
Amortisation of acquired intangibles 2 (2,223) (1,595)
Share based payment 2 (112) (98)
Acquisition costs 2 (294) (86)
Restructuring costs (281) (398)
Operating profit 1 4,141 3,619
Finance income 38 132
Finance costs (1,141) (602)
--------- ---------
Profit before taxation 3,038 3,149
Taxation 3 (634) (714)
Profit after taxation from continuing operations 2,404 2,435
========= =========
(Loss)/profit after taxation from discontinuing operations 8 (1,018) 76
========= =========
Profit for the financial year attributable to equity shareholders 1,386 2,511
========= =========
Earnings per share:
From continuing operations
- Basic 4 7.6p 7.8p
-Diluted 4 7.5p 7.7p
From continuing and discontinuing operations
-Basic 4 4.4p 8.0p
-Diluted 4 4.3p 8.0p
Consolidated statement of Comprehensive income
2020 2019
GBP'000 GBP'000
Profit for the year 1,386 2,511
Items that will not be subsequently be reclassified to profit or loss
Remeasurement of defined benefit liability 58 (581)
Income tax relating to items not reclassified (43) 99
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations 120 445
Total comprehensive income for the year attributable to equity shareholders 1,521 2,474
======== ========
Consolidated Balance Sheet
at 31 May 2020 Note 2020 2019
GBP'000 GBP'000
Non current assets
Goodwill 23,459 23,369
Other intangible assets 13,834 14,483
Property, plant and equipment 34,445 26,576
Deferred tax 1,241 1,423
Pension and other employee obligations 1,646 1,299
---------- ----------
74,625 67,150
Current assets
Inventories 13,390 14,441
Trade and other receivables: amounts falling due within one year 36,910 31,549
Current tax asset 1,221 234
Cash and cash equivalents 5,088 8,909
---------- ----------
56,609 55,133
Total assets 131,234 122,283
========== ==========
Current liabilities
Trade and other payables (30,308) (31,405)
Lease liabilities (2,125) (750)
Borrowings (6,005) (4,945)
Current tax liabilities (70) (69)
Provisions (5,514) (5,340)
Derivatives (36) (44)
Total current liabilities (44,058) (42,553)
========== ==========
Non-current liabilities
Borrowings (3,965) (3,817)
Lease liabilities (9,340) (1,420)
Deferred tax (2,460) (2,073)
Contingent consideration (256) (256)
Other creditors (1,247) (2,870)
---------- ----------
Total non-current liabilities (17,268) (10,436)
---------- ----------
Total liabilities (61,326) (52,989)
========== ==========
Net assets 69,908 69,294
========== ==========
Equity
Share capital 1,588 1,568
Share premium account 14,970 14,018
Capital redemption reserve 1,299 1,299
Translation reserve 430 310
Merger reserve 28,949 28,949
Other reserves 180 180
Investment in own shares (4,235) (3,435)
Retained earnings 26,727 26,405
Total equity attributable to equity holders of the parent 69,908 69,294
========== ==========
Consolidated statement of changes in equity
at 31 May 2020
Capital
Share redemp- Trans-
Share premium tion Merger lation Other Invest-ment in Retained
capital account reserve reserve reserve reserves own shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2018 1,553 13,385 1,299 28,949 (135) 180 (2,835) 25,396 67,792
Ordinary shares
issued 15 633 - - - - - - 648
Dividends paid - - - - - - - (1,118) (1,118)
Investment in own
shares - - - - - - (600) - (600)
Share-based
payments - - - - - - - 98 98
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Total
transactions
with owners 15 633 - - - - (600) (1,020) (972)
Profit for the
year - - - - - - - 2,511 2,511
Other
comprehensive
income
Actuarial loss
for the year on
pension scheme - - - - - - - (581) (581)
Deferred tax on
actuarial
movement on
pension scheme - - - - - - - 99 99
Exchange gain - - - - 445 - - - 445
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Total
comprehensive
income for the
year - - - - 445 - - 2,029 2,474
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Balance at
31 May 2019 1,568 14,018 1,299 28,949 310 180 (3,435) 26,405 69,294
========= ======== ======== ======== ======== ========= ================ ========== =======
At 1 June 2019 1,568 14,018 1,299 28,949 310 180 (3,435) 26,405 69,294
Ordinary shares issued 20 952 - - - - - - 972
Dividends paid - - - - - - - (1,192) (1,192)
Investment in own shares - - - - - - (800) - (800)
Share-based payments - - - - - - - 112 112
------ ------- ----- ------ --- --- -------- -------- -------
Total transactions with owners 20 952 - - - - (800) (1,080) (908)
Profit for the year - - - - - - - 1,386 1,386
Consolidated statement of changes in equity (continued)
at 31 May 2020
Capital
Share redemp- Trans-
Share premium tion Merger lation Other Invest-ment in Retained
capital account reserve reserve reserve reserves own shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other
comprehensive
income
Actuarial gain
for the year on
pension scheme - - - - - - - 58 58
Deferred tax on
actuarial
movement on
pension scheme - - - - - - - (43) (43)
Exchange gain - - - - 120 - - - 120
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Total
comprehensive
income for the
year - - - - 120 - - 1,401 1,521
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Balance at
31 May 2020 1,588 14,970 1,299 28,949 430 180 (4,235) 26,726 69,907
========= ======== ======== ======== ======== ========= ================ ========== =======
Consolidated Cash Flow Statement
for the year ended 31 May 2020 Note
2020 2019
GBP'000 GBP'000
Operating activities
Cash flows from operating activities 5 2,919 10,468
Finance costs paid (1,189) (608)
Income tax paid (1,527) (589)
Contributions to defined benefit plan (254) (243)
--------- -------
Net cash (outflow)/ inflow from operating activities (51) 9,028
--------- -------
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 7 720 (132)
Finance income 38 131
Purchase of intangible assets (760) (848)
Purchase of property, plant and equipment (3,984) (2,344)
Proceeds from sale of property, plant and equipment - 248
--------- -------
Net cash used in investing activities (3,986) (2,945)
Financing activities
Equity dividends paid (1,192) (1,118)
Repayments of bank loans (675) (3,278)
Repayment of leases (2,200) (1,033)
Proceeds from issue of ordinary shares 972 48
Proceeds from borrowings 3,808 597
--------- -------
Net cash inflow/(outflow) from financing activities 713 (4,784)
Net (decrease)/increase in cash and cash equivalents (3,324) 1,299
Cash and cash equivalents at beginning of year 8,053 6,565
Effect of foreign exchange rate changes on cash (36) 189
--------- -------
Cash and cash equivalents at end of year 4,693 8,053
--------- -------
1 Segmental analysis
Energy Energy Medical Unallocated
Year ended 31 May 2020 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 12,780 38,366 11,879 - 63,025
After Market 36,530 14,358 - - 50,888
--------- ---------- --------- --------------- ----------
Revenue 49,310 52,724 11,879 - 113,913
========= ========== ========= =============== ==========
Operating profit/(loss) 1,261 3,903 (326) (697) 4,141
Net finance costs (1,103)
Taxation (634)
----------
Profit after tax from continuing operations 2,404
==========
Segment non-current assets 46,933 22,978 4,714 - 74,625
Segment current assets 25,072 23,613 3,169 4,755 56,609
--------- ---------- --------- --------------- ----------
72,005 46,591 7,883 4,755 131,234
Segment liabilities (3,845) (29,875) (9,627) (17,979) (61,326)
--------- ---------- --------- --------------- ----------
Net assets 68,160 16,716 (1,744) (13,224) 69,908
========= ========== ========= =============== ==========
Non-current asset additions
Intangible assets 1,697 336 118 - 2,151
Tangible assets 1,574 2,292 118 - 3,984
--------- ---------- --------- --------------- ----------
3,271 2,628 236 6,135
========= ========== ========= =============== ==========
Energy EPM results include the acquisition of Energy Steel which
contributed GBP7.9m Group revenue and GBP0.9m loss after tax
respectively (note 7). Energy PSRE results include the acquisition
of the trade and assets of Booth Industries which contributed
GBP9.6m Group revenue and GBP63,000 loss after tax (note 7).
Energy Energy Medical Unallocated
Year ended 31 May 2019 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 13,888 30,055 12,048 - 55,991
After Market 35,069 12,884 100 - 48,053
---------- ---------- --------- --------------- ----------
Revenue 48,957 42,939 12,148 - 104,044
========== ========== ========= =============== ==========
Operating profit/(loss) 2,874 1,930 (204) (981) 3,619
Net finance costs (470)
Taxation (714)
----------
Profit after tax from continuing operations 2,435
==========
Segment non-current assets 44,285 17,903 4,962 - 67,150
Segment current assets 20,756 28,051 5,036 1,290 55,133
---------- ---------- --------- --------------- ----------
Segment liabilities (27,563) (21,040) (1,417) (2,969) (52,989)
---------- ---------- --------- --------------- ----------
Net assets 37,478 24,914 8,581 (1,679) 69,294
========== ========== ========= =============== ==========
Non-current asset additions
Intangible assets 171 378 299 - 848
Tangible assets 1,258 826 261 - 2,344
---------- ---------- --------- --------------- ----------
1,428 1,204 560 - 3,192
========== ========== ========= =============== ==========
Geographical
The following tables provides an analysis of the Group's revenue
by destination and the location of non-current assets by
geographical market:
2020 2019 2020 2019
Non-current Non-current
Revenue Revenue Assets Assets
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 44,556 37,441 42,592 50,660
Europe (excl. UK) 14,022 10,736 - -
United States of America 21,009 14,045 29,587 14,455
Africa & Middle East 3,965 3,867 - -
Americas & Caribbean (excl. USA) 5,002 3,228 - -
China 8,325 10,240 2,396 2,018
Asia Pacific (excl. China) 17,034 24,486 51 17
113,913 104,044 74,626 67,150
========= ========= =========== ===========
The Group had no single external customer which represented more
than 10% (2019: EPM Revenue GBP12,336,000 11.9%) of the Group's
revenue.
Prior year figures have been restated throughout the notes due
to Crown moving to discontinued operations.
2 Adjusted Earnings before interest, tax, depreciation and amortisation
2020 2019
GBP'000 GBP'000
Profit before tax from continuing operations 3,038 3,149
Share based payment expense 112 98
Acquisition costs 294 89
Restructuring costs 281 395
Loss/(gain) on derivatives 8 (83)
Unwinding of discounting on dilapidation provision 88 85
Amortisation of intangibles from business combinations 2,223 1,595
------- -------
Adjusted profit before tax from continuing operations 6,044 5,328
Finance income (38) (132)
Finance cost 1,141 602
Loss on derivatives/unwinding of discounting on dilapidation provision (96) (2)
------- -------
Adjusted profit before interest, tax and amortisation from business combinations ('EBITA') 7,051 5,796
Depreciation 4,321 3,219
Amortisation of other intangible assets 403 356
Adjusted Earnings before interest, tax, depreciation and amortisation ('EBITDA') from continuing
operations 11,775 9,371
======= =======
The Directors believe that the above adjusted earnings are a
more appropriate reflection of the Group performance.
3 Taxation
2020 2019
GBP'000 GBP'000
Continuing operations
Current tax
Corporation tax - current year 440 -
Corporation tax - prior year 192 444
Overseas tax (170) 975
-------- --------
Total current tax 462 1,419
Deferred tax
Deferred tax - current year 138 (624)
Deferred tax - prior year (32) (81)
Deferred tax - rate 66 -
Total deferred tax 172 (705)
Tax charge on continuing operations 634 714
======== ========
Tax credit on discontinued operations (200) (81)
======== ========
Total tax charge in the year 434 633
======== ========
UK corporation tax is calculated at 19 % (2019: 19%) of the
estimated assessable profit/loss for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
4 Earnings per ordinary share
Basic and diluted earnings per share have been calculated in
accordance with IAS 33 which requires that earnings should be based
on the net profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares in issue during the
year.
For diluted earnings per share the weighted average number of
ordinary shares is adjusted to assume conversion of all dilutive
potential ordinary shares, being the CSOP and ExSOP share
options.
2020 2019
Number Number
Weighted average number of shares - basic 31,531,278 31,225,440
Share option adjustment 569,687 340,920
Weighted average number of shares - diluted 32,100,965 31,566,360
========== ==========
2020 2019
GBP'000 GBP'000
Profit from continuing operations 2,404 2,435
Share based payment expense 112 98
Acquisition costs 294 89
Restructuring costs 281 395
Loss/(gain) on derivatives 8 (83)
Unwinding of discounting on dilapidation provision 88 85
Amortisation of intangibles from business combinations 2,223 1,595
Adjusted earnings from continuing operations 5,410 4,614
========== ==========
From continuing operations:
Basic earnings per share 7.6p 7.8p
Adjusted basic earnings per share 17.2p 14.8p
Diluted earnings per share 7.5p 7.7p
Adjusted diluted earnings per share 16.9p 14.6p
(Loss)/earnings from discontinuing operations: (1,018) 76
From discontinuing operations
Basic (loss)/earnings per share (3.2)p 0.2p
Adjusted basic (loss)/earnings per share (0.7)p 0.2p
Diluted (loss)/earnings per share (3.2)p 0.2p
Adjusted diluted (loss)/earnings per share (0.7)p 0.2p
Earnings attributable to shareholders 5,199 4,690
Basic earnings per share 4.4p 8.0p
Adjusted basic earnings per share 16.5p 15.0p
Diluted earnings per share 4.3p 8.0p
Adjusted diluted earnings per share 16.2p 14.9p
The Directors believe that the above adjusted earnings per share
calculation for continuing operations is a more appropriate
reflection of the Group's underlying performance.
There are 585,000 share options at 31 May 2020 (2019: 490,000)
that are not included within diluted earnings per share because
they are anti-dilutive.
5 Notes to the consolidated cash flow statement
Cash flows from operating activities:
2020 2019
GBP'000 GBP'000
Continuing operations
Profit before income tax from continuing operations 3,038 3,149
Loss before income tax from discontinuing operations (1,218) (5)
Adjustments for:
Depreciation 4,343 3,240
Amortisation of intangible assets 466 393
Amortisation of intangibles from business combinations 2,222 1,595
Loss/(gain) on disposal of property, plant and equipment 119 (13)
Finance income (38) (132)
Finance expenses 1,141 616
Share based payment charge 112 98
Changes in working capital
Decrease/(increase) in inventories 2,157 (2,213)
(Increase)/decrease in trade and other receivables (5,010) 1,158
(Decrease)/increase in trade and other payables (3,565) 4,150
Decrease in provisions (824) (1,458)
Other non cash changes (24) (110)
Cashflows from operating activities 2,919 10,468
========= =========
2020 2019
GBP'000 GBP'000
Cash and cash equivalents
Cash 5,088 8,909
Overdrafts (395) (856)
4,693 8,053
========= =========
6 Impact of adoption of IFRS 16 Leases
IFRS 16 Leases replaces IAS 17 Leases along with three
Interpretations (IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC 15 Operating Leases-Incentives and SIC 27
Evaluating the Substance of Transactions Involving the Legal Form
of a Lease).
The adoption of this new Standard has resulted in the Group
recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those
identified as low-value or having a remaining lease term of less
than 12 months from the date of initial application.
The new Standard has been applied using the modified
retrospective approach, with no impact upon the opening balance of
retained earnings for the current period. Prior periods have not
been restated.
For those leases previously classified as finance leases, the
right-of-use asset and lease liability are measured at the date of
initial application at the same amounts as under IAS 17 immediately
before the date of initial application.
Impact on the Statement of financial position:
-- GBP9.7m of additional lease liabilities were recognised of
which GBP1.2m was classified as short-term and GBP8.5m as
long-term.
-- In respect of additional leases recognised, the Group has
capitalised GBP8.0m of right-of-use assets. The majority of this
figure relates to land & building leases across the Group.
-- GBP1.7m of accrued rent and lease incentives were de-recognised.
-- There has been no impact on retained earnings as all leases
have been valued at 1 June 2019.
Impact on the Income statement:
-- The impact on the Income Statement for the year to 31 May
2020 is an increase in operating profit of GBP0.2m compared to the
operating profit had IAS 17 continued to apply. This is made up of
a reduction in operating lease rentals of GBP1.5m offset by a
depreciation charge of GBP1.3m.
-- Additional lease liabilities brought onto the balance sheet
have increased interest payable in the period by GBP0.4m, and the
overall impact on profit before/after tax is a reduction of
GBP0.2m.
Impact on the Statement of cash flows:
-- There is no impact on cash and cash equivalents as a result
of the implementation of IFRS 16
-- Net cash inflow from operating activities for the year to 31
May 2020 increased by GBP1.1m as a result of the principle payments
made on lease liabilities being reclassified from cash generated
from operations to financing activities.
-- Net cash flow from investing activities has decreased by
GBP0.1m as a result of the recognition of new leases or amendments
to existing leases which were historically classified as operating
leases.
-- Net cash outflow from financing activities increased by
GBP1.0m as a result of the points raised above.
Impact of IFRS 16 upon net debt:
31 May 2020 1 June 2019 31 May 2019
GBP'000 GBP'000 GBP'000
Cash 5,088 8,909 8,909
Loans (9,575) (7,905) (7,905)
Lease liability - finance leases under IAS17 (2,503) (2,170) (2,170)
Lease liability - additional liability under IFRS 16 (8,962) (9,731) -
Overdrafts (395) (856) (856)
------------- ------------- -------------
Net (debt) / cash (16,347) (11,754) (2,023)
============= ============= =============
Equity 69,907 69,294 69,294
============= ============= =============
Net (debt) / cash to equity ratio (23.4)% (17.0)% (2.9)%
============= ============= ===============
7 Acquisitions
Business combination - Energy Steel & Supply Co
On 24 June 2019 the Group acquired 100 percent of the issued
share capital of Energy Steel & Supply Co. based in the USA for
$0.6m. This acquisition expands the Company's nuclear capabilities
and product lines for new and existing customers. Energy Steel
forms part of the Group's Energy-EPM division. The fair value of
net assets acquired at the date of acquisition were as follows:
Fair value of assets and liabilities acquired:
GBP'000
Property, plant and equipment 121
Deferred tax assets 16
Inventories 1,308
Trade and other receivables 1,265
Current tax assets 8
Cash 1,186
Finance lease liabilities (391)
Trade and other payables (3,268)
Provisions (1,029)
--------
Net liabilities (784)
Intangible assets identified - order book 1,387
Deferred tax liability on intangible assets identified (375)
Goodwill 238
--------
466
--------
Fair value of consideration transferred:
Cash paid (466)
--------
Consideration (466)
Cash acquired 1,186
--------
Cash received relating to the acquisition (720)
Acquisition costs charged to Administrative Expenses (144)
--------
Net cash received relating to the acquisition 576
--------
Management did not identify any further intangible assets on
acquisition of this business due to its distressed state.
Trade and other receivables are shown above after a fair value
adjustment of $11,000 from their original book value.
7 Acquisitions (continued)
Business combination - Energy Steel & Supply Co
(continued)
The impact of the Energy Steel acquisition on the Consolidated
income statement is as follows:
GBP'000
Revenue 7,936
Cost of sales (5,880)
--------
Gross profit 2,056
Distribution costs (582)
Other administrative expenses (1,320)
--------
Operating profit before amortisation of acquired intangibles,
other non-underlying items and other exceptional items
other non-underlying items and exceptional items 154
Redundancy expenses (51)
Acquisition related expenses (168)
Amortisation of acquired intangibles (1,194)
--------
Operating loss (1,259)
Finance expenses (12)
--------
Loss before tax (1,271)
Tax income 328
--------
Overall effect on the Consolidated Income Statement (943)
--------
Since acquisition Energy Steel contributed the following to the
Group's cashflows:
GBP'000
Net cash outflow from operating activities (2,314)
Net cash used by investing activities (242)
Net cash inflow from financing activities 7
Asset purchase - Booth Industries
On 11 June 2019 the Group acquired the trade and certain of the
assets of Booth Industries ('Booth') from Administration. Booth
design and manufacture bespoke high-integrity doors. Booth has been
purchased by the Group's subsidiary, Stainless Metalcraft
(Chatteris) Limited and its results will be included within the
results of the Energy-PSRE division.
The Group has judged this transaction should be treated as an
asset purchase rather than a business combination. This is
primarily based on the value of the land & buildings
representing the majority of the total consideration paid for the
business. A valuation exercise has been performed on the land &
buildings by third party experts.
Assets purchased comprise of:
GBP'000
Property, plant and equipment 1,602
Inventories 280
Total consideration paid 1,882
The impact of the Booth acquisition on the Consolidated income
statement since acquisition is as follows:
GBP'000
Revenue 9,575
Cost of sales (6,105)
--------
Gross profit 3,470
Distribution costs (153)
Administrative expenses (3,228)
--------
Operating profit before amortisation of acquired intangibles,
other non-underlying items and other exceptional items
other non-underlying items and exceptional items 89
Acquisition related expenses (128)
--------
Operating loss (39)
Finance expenses (24)
--------
Loss before tax (63)
Tax expense -
--------
Overall effect on the Consolidated Income Statement (63)
--------
Since acquisition Booth contributed the following to the Group's
cashflows:
GBP'000
Net cash outflow from operating activities (1,419)
Net cash used by investing activities (254)
Net cash inflow from financing activities 819
8 Loss after taxation from discontinuing operations
Due to the weight of the disruption from Covid 19, management
took the decision to close the Crown site near Bristol and relocate
the residual road and rail infrastructure assets to Stainless
Metalcraft. The assets of the business that remain on the balance
sheet as at 31 May 2020 will be moved during FY21 to the Chatteris
site. The lease on the Bristol site ends in November 2020 when we
will have fully exited the site.
Discontinued activities relate to the discontinuation of the
Crown facility and associated trade and costs.
The impact of the discontinued activities 2020
on the Consolidated income statement is GBP'000 2019
as follows: GBP'000
Revenue 745 1,472
Gross profit 102 507
Distribution costs (102) (123)
Other administrative expenses (401) (375)
Restructuring costs (149) -
Other exceptional costs (503) -
Goodwill impairment (155) -
--------- ---------
Operating (loss)/profit (1,208) 9
Finance expenses (10) (14)
--------- ---------
Loss before taxation (1,219) (5)
Taxation 200 81
--------- ---------
Loss after taxation from discontinuing operations (1,018) (76)
9 Preliminary statement and basis of preparation
This preliminary statement, which has been agreed with the
auditors, was approved by the Board on 29 September 2020. It is not
the Group's statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
The statutory accounts for the two years ended 31 May 2020 and
2019 received audit reports which were unqualified and did not
contain statements under s498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 May 2019 have been
delivered to the Registrar of Companies but the 31 May 2020
accounts have not yet been filed.
The Company's financial statements have been prepared and
approved by the directors in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and those parts of the Companies Act 2006 that apply to
companies reporting under IFRS. The principal accounting policies
adopted by the company, which remain unchanged, except for adoption
of IFRS 16, are set out in the statutory financial statements for
the year ended 31 May 2020.
10 Annual report and Accounts
The Report and Accounts for the year ended 31 May 2020 will be
available on the Group's website www.avingtrans.plc.uk on or around
16 October 2020. Further copies will be available from the
Avingtrans' registered office:
Chatteris Business Park, Chatteris, Cambridgeshire PE16 6SA.
11 Annual General Meeting
The Annual General Meeting of the Group will be either held at
Shakespeare Martineau LLP, No1 Colmore Square, Birmingham, B4 6AA
or virtually depending on circumstances on 18 November 2020 at
11:00am. Final details will be notified by RNS/ on the Group's
website www.avingtrans.plc.uk on or around 16 October 2020.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FLFSAATIAFII
(END) Dow Jones Newswires
September 30, 2020 02:00 ET (06:00 GMT)
Avingtrans (LSE:AVG)
Historical Stock Chart
From Apr 2024 to May 2024
Avingtrans (LSE:AVG)
Historical Stock Chart
From May 2023 to May 2024