TIDMAVG
RNS Number : 7430N
Avingtrans PLC
27 September 2023
27 September 2023
Avingtrans Plc
("Avingtrans" or the "Group")
Preliminary results for the year ended 31 May 2023
Avingtrans PLC (AIM: AVG), 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 year ended 31 May
2023.
Financial Highlights
-- Revenue from continuing operations increased by 17.5% to GBP116.4m (2022: GBP99.1m)
-- Gross Margin reduced slightly to 32.9% (2022: 34.1%), driven by changes in the OEM/AM mix
-- Adjusted(1) EBITDA from continuing operations increased by
10.6% to GBP13.7m (2022: GBP12.4m)
-- Adjusted(1) PBT from continuing operations increased by 11.1% to GBP9.0m (2022: GBP8.1m)
-- Adjusted(1) Diluted earnings per share from continuing
operations increased by 8.3% to 23.4p (2022: 21.6p)
-- Net Cash (excluding IFRS16) as at 31 May 2023 of GBP13.0m (31
May 2022: GBP16.7m) following investments in the Group
-- Final Dividend 2.8p per share (2022: 2.6p) resulting in a
total dividend for the year of 4.5p (2022: 4.2p)
(1) Adjusted to add back amortisation of intangibles from
business combinations, acquisition costs and exceptional items
Operational Highlights
Energy
-- Revenue increased 16.8% to GBP112.8m (2022: GBP96.6m)
-- Metalcraft contract to supply the Sellafield 3M3 boxes is
on-going in phase two of the programme
-- Booth completed the HS2 door designs and will commence manufacture in FY24
-- Hayward Tyler and Energy Steel again won multiple nuclear
bids, including next generation enabling contracts
-- Acquired HES/HEVAC for GBP0.9m 30 December 2022 and
integrated into the Ormandy Bradford site
-- Post period end, completed the acquisition of Slack and Parr,
a manufacturer of specialist pumps and supplier of high-precision
gear metering pumps, hydraulic flow dividers and industrials pumps
for a total consideration of up to GBP4.9m
Medical
-- Revenue increased 44% to GBP3.6m (2022: GBP2.5m)
-- Compact helium-free MRI system making good progress -
expected to launch in Q4 calendar 2023, with US 510(K) approval to
follow in H1 2024
-- Post period end acquisition of remaining issued share capital
of 3D X-ray leader, Adaptix, in Oxford, UK, for a total
consideration of GBP8.1m including absorbed and repaid debt.
-- Adaptix has launched its veterinary product and was awarded
its 510(K) to FDA in USA for orthopaedics
-- Potentially significant market opportunities in the target
imaging markets for both businesses
Current Trading & Outlook
-- In the quarter since 31 May 2023, the Group has performed in
line with management expectations with the momentum of FY23
continuing into FY24
-- The Board remains confident about the current strategic
direction and potential future opportunities across our markets,
though mindful of market conditions
-- We will continue to refine our business by pinpointing
specific additional acquisitions as the opportunities arise, to
generate superior shareholder value, whilst maintaining a prudent
level of financial headroom.
Commenting on the results, Roger McDowell, Chairman, said:
"We are delighted to report a robust set of results. It has been
a challenging year in many ways however Avingtrans has again
delivered and met market expectations. We used our strong balance
sheet wisely in the year and bought HES/HEVAC, which is already
successfully integrated with Ormandy. Post year end, we acquired
the assets of Slack and Parr, a specialist pump manufacturer and
also completed the acquisition of X-ray specialist Adaptix, as well
as further investing in Magnetica's novel MRI systems. We entered
FY24 with a healthy order book and we look forward to further
progress across the Group this year, with macro developments in the
energy, infrastructure and medical markets being tilted in our
favour."
Enquiries:
Avingtrans plc 01354 692391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Singer Capital Markets (Nominated Adviser
and Broker) 02074 963000
Shaun Dobson, Alex Bond, Oliver Platts
IFC Advisory (Financial PR) 020 3934 6630
Graham Herring, Tim Metcalfe, Zach Cohen
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 & Nottingham, UK, USA,
China and India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Energy Steel, Inc - Rochester Hills, 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
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 and 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.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving
customers in industrial markets.
Adaptix Ltd - Oxford, UK
Adaptix has developed novel 3D X-ray for Orthopaedic and Veterinary
applications amongst others. Commercialisation of this system
(and others) is on-going.
Magnetica Ltd - Brisbane, Australia
Magnetica Limited specialises in the development of next generation
MRI technologies, including dedicated extremity MRI systems and
MRI system components. Magnetica has successfully built and tested
a compact, integrated 3 Tesla orthopaedic MRI system, demonstrating
clinical-quality imaging. Commercialisation of this system (and
others) is on-going. Magnetica's structure now includes two other
business units:
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.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of those Regulations.
Chairman's Statement
The latest financial year has been marked by the Group's
commendable performance in the face of well documented ongoing
global disruptions. Despite these challenges, the Board is pleased
with the Group's achievements, with strong organic revenue growth,
robust adjusted EBITDA note 2 from continuing operations and a
stable net cash position at the year-end. Notable investments in
Magnetica and HES/HEVAC have contributed to the favourable results,
even amidst supply chain disruptions and customer order delays. As
we look ahead to FY24, our order book position is very healthy.
Our Pinpoint-Invest-Exit ("PIE") strategy was again successfully
deployed, reinforcing our investments in medical imaging at
Magnetica and the 3D X-ray business, Adaptix, which we have now
acquired 100% (post period end). Both ventures continue to make
strides in developing disruptive and complementary medical imaging
products, particularly for orthopaedic applications. Furthermore,
the acquisition of HES/HEVAC and its integration into Ormandy has
bolstered the market standing of that business unit. Post period
end, we also completed the significant assets acquisition of Slack
and Parr, another specialist pumps and hydraulics manufacturer to
capitalise on its global footprint, combined with its well-invested
operational capability, powerful brand, highly skilled workforce
and large installed base.
Despite the challenging external economic landscape, our
divisional management teams have demonstrated agility and
resilience, building strong business platforms. Aftermarket growth
in Engineered Pumps and Motors (EPM) and Process Solutions and
Rotating Equipment (PSRE) has remained steady, supporting our value
propositions to OEM and end-user customers. The positive sentiment
in the nuclear and oil and gas sectors has resulted in increased
orders in those areas. Our focus on end-user access continues to
drive improved profitability and underpins our product and service
development.
The EPM division's performance improved over the year, despite
supply chain disruptions and order placement challenges, to end the
year with a strong order book. Energy Steel showed further
improvement, with promising aftermarket prospects and new customers
placing orders with us.
The PSRE division also made solid progress, notably at Booth,
which demonstrated continued operational strength and sustained
record orders. Meanwhile, at Metalcraft, the substantial 3M3 box
contract with Sellafield continues in the volume production phase.
Our apprentice training school at the Chatteris site currently has
18 apprentices in house, with further expansion to come. Combining
Ormandy with HES/HEVAC has strengthened both businesses and we
expect to see an improvement in performance in FY24, as a
result.
The acquisition of Adaptix and further investment in Magnetica
has firmly established the Medical and Industrial Imaging (MII)
division as a new niche imaging systems supplier, with promising
X-ray and MRI products in the pipeline. The Board is enthusiastic
about the division's potential, expecting long-term positive
returns for the Group, albeit perhaps via a different vehicle, to
maximize returns.
In view of the encouraging overall results, the Board is
proposing a final year dividend of 2.8 pence per share, resulting
in a total dividend of 4.5p. With a robust balance sheet, the Group
remains vigilant in seeking shareholder value-enhancing M&A
opportunities, while also being cautious and selective in the
current manufacturing sector climate.
Lastly, I extend my appreciation to all Avingtrans employees,
both existing and new, for their dedication and resilience in
navigating these challenging times.
Roger McDowell
Chairman
26 September 2023
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"), through which we have had a strong track record in
returning significant shareholder value over the past decade.
With an increased presence in our target markets, a focus on
aftermarkets, strength in depth of the management teams and a lean
central structure, the Group continues to grow profitably - despite
the effects of macroeconomic disruptions - and the Board is focused
on seeking additions to the Avingtrans value-add proposition.
The majority of the Group's adjusted key financial metrics
trended positively in the period, despite the ongoing impacts of
the Russia-Ukraine conflict and the related global financial
stress.
The Group is focused on the global Energy and Medical markets,
both of which play into some of the world's mega-trends, such as:
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
strengthen its nuclear installed base, focusing on civil, defence,
and national security applications, particularly for life extension
purposes. The business also explores opportunities in the
hydrocarbon market sectors. Energy Steel, acquired in June 2019 and
specialising in nuclear life extension, has shown consistent
recovery in North America. Furthermore, EPM is actively developing
solutions for new nuclear technologies and other low carbon energy
sources, like concentrated solar, to leverage the global energy
supply transition. Throughout FY23, EPM secured significant
contracts, including additional pumps for the next generation
nuclear business, TerraPower, in the USA and further life extension
equipment for the Forsmark nuclear power station in Sweden. The EPM
strategy is strengthened by crucial partnership agreements with
companies like Shinhoo, expanding our product portfolio and
creating cross-selling opportunities. The post period end
acquisition of Slack and Parr further enhances our global
specialist pumps footprint.
Process Solutions and Rotating Equipment (Energy - PSRE): A
primary target for PSRE is to establish a comprehensive offering in
the nuclear decommissioning and reprocessing markets, building on
long-term contracts for nuclear waste storage containers and the
existing equipment installed across the vast Sellafield site.
During the period, Metalcraft and Sellafield Limited continued with
the contract to provide high integrity stainless steel storage
boxes for Sellafield. The 3M3 ('three metre cubed') box contract is
currently now valued at up to GBP70m and is still to complete. The
division's nuclear credentials were again enhanced by Booth
Industries' strong performance, expanding our market reach into
Critical National Infrastructure (CNI). Booth's multi-year contract
with HS2, initially worth GBP36m, is progressing well, with
manufacturing expected to commence in FY24. Ormandy's market
position in HVAC has been significantly strengthened by the
HES/HEVAC acquisition, with a resulting stronger product
proposition. PSRE continues to benefit from a robust prospect
pipeline, positioning it well to bid for new opportunities as they
arise.
Medical and Industrial Imaging (Medical - MII): Following the
Magnetica acquisition in January 2021 and the post-period end
acquisition of the remaining shares in Adaptix, the focus for the
medical division is to become a niche market leader in the
production of compact helium-free MRI systems and 3D X-ray systems,
for applications such as orthopaedic and veterinary imaging. This
is an exciting opportunity for the Group. In support of the core
strategy, the division will continue to work on niche Nuclear
Magnetic Resonance (NMR) and scientific magnet products and
services, since these are complementary technologies. During the
year, Adaptix, based in Oxford, UK, received its 510(k) approval
from the FDA, to enable sales of its orthopaedic product in the
USA. Adaptix's 3D X-ray technology is being developed in parallel
to Magnetica's MRI technology and, as envisioned, the two
businesses are working in an increasingly complementary manner.
Across the Group's customers, we see continued pressure on
aftermarket expenditure, where operational efficiency, reliability
and safety are paramount. Customers are looking for reliable supply
chain partners, to provide long term support of both new
infrastructure and legacy installations.
Pinpoint-Invest-Exit
Continuing with our successful Pinpoint-Invest-Exit strategy,
Avingtrans demonstrated its commitment by raising its stake in
Magnetica to 71.7% during the period (at 26 September 2023 74.8%).
Additionally, post period end, we successfully completed the 100%
acquisition of Adaptix, as mentioned earlier. During the period, we
also exited from Metalcraft China, selling the business for GBP1.0m
to a local manufacturer. After our interest in MRI component
manufacture ended as planned, there was no viable strategic reason
to keep this business unit in China. However, we were pleased to
find a good home for it, to ensure that all our employees there
continued to enjoy gainful employment.
The focus on other strategic acquisitions remained strong, with
the addition of HVAC specialist HES/HEVAC, for a total
consideration of GBP0.9m, already contributing positively to
Ormandy's market strength, after a smooth integration process. Post
period end, the acquisition of the assets of Slack and Parr, in the
UK, USA and China, for a consideration of up toGBP4.9m, added
another specialist pumps and hydraulics capability to the
Group.
The ongoing progress at previous acquisitions, Booth and Energy
Steel, was again pleasing, as both businesses contributed strongly
to the results of their respective divisions.
The Group remains confident about the current strategic
direction and potential future opportunities across its chosen
markets. Some of our market sectors (eg Nuclear) benefitted from
the global disruptions seen in the period, which drove higher
energy costs and caused governments to review energy security.
Markets - Energy
The global demand for energy remains relentless and we
anticipate a sustained period of growth in the coming years. The
aftermath of the Covid pandemic spurred a push towards enhanced
efficiency and decarbonisation. However, the Russia-Ukraine
conflict subsequently raised political awareness regarding the
importance of energy security, leading to a recalibration of the
rush towards renewable energy in the short to medium term. This
situation could potentially benefit our businesses, particularly in
the nuclear sector.
End User/Aftermarket
Operators and end-users demand a blend of quick response through
local support and a requirement to drive improvements through
equipment upgrades and modernisation. Facilities are being operated
for much longer than their intended design lives, resulting in 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 the
1GW+ new build opportunities are in Asia, with the exception of the
limited UK programme. However, we are still experiencing 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 or
Advanced Generation IV Reactors - e.g. with TerraPower and
GE-Hitachi. 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 92 reactors generating around 30 percent of the world's
nuclear electricity. Coupled with the heritage Westinghouse
technology operating in Europe and Asia, the EPM division's
long-standing position in this market provides opportunities 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 UK remains pre-eminent when it comes to decommissioning
nuclear facilities and subsequent 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 activity in the UK, South Korea, the USA and China
dominating development activity. The Group views these new
technologies as an attractive route forward 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, 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,
Southeast Asia, Eastern Europe and the Middle East. EPM is
optimising its product line, to take market share and to create new
opportunities - e.g. in products to remove toxins from the exhaust
stacks of power stations.
-- Gas - natural gas, primarily in the form of combined cycle
gas turbine power plants has been a growing market space, primarily
in the West, albeit disrupted by the Russia-Ukraine conflict. The
Group continues to develop 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 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 pumps for
concentrated solar applications.
Hydrocarbons
The ongoing conflict in Ukraine resulted in a surge in European
gas prices, leading to unprecedented levels of volatility in the
energy market. Our Hayward Tyler businesses have long been
associated with providing top-notch subsea and submersible pumps
and motors to the oil and gas fields of the Norwegian Shelf.
Recently, we have experienced a significant boost in demand for
both new equipment and aftermarket services, as the market seeks to
maximise supplies from this region. The current situation, coupled
with informed forecasts, indicates that the demand for our products
and services is likely to remain strong. This presents a promising
opportunity for our business to further capitalise on the evolving
energy landscape.
Markets - Medical
The Diagnostic (medical) and molecular imaging markets are large
global sectors, dominated by a few large systems manufacturers. The
total Medical Imaging Market is expected to reach $47.4 billion by
2030 according to Grand View Research, a compound annual growth
rate of 4.8%. The largest market is the USA, followed by Europe and
Japan. The fastest growing markets are China and India. Following
the acquisition of a majority stake in Magnetica (AUS) in January
2021, we merged Magnetica with Scientific Magnetics (UK) and Tecmag
(US) and we have continued to invest in Magnetica. Post-period end,
we acquired 100% of Adaptix, for GBP8.1m, including debt absorbed
and repaid. Adaptix is an emerging medtech leader in the field of
3D X-ray equipment. The objective of this acquisition activity is
to create innovative, niche MRI and X-ray systems supplier, which
can address specific parts of the market, not well served by
dedicated products at present. This includes orthopaedic and
veterinary imaging. The development paths of Magnetica and Adaptix
are convergent, which enables both businesses to benefit from
efficiency and cost gains, as well as optimising the route to
market - especially in orthopaedics. Market drivers for these
segments include an ageing global population and the rising
incidence of chronic diseases.
The growing prevalence of chronic diseases, especially in older
populations, is increasing demand for medical imaging in hospitals
and other diagnostic settings. Technical innovations, including
advances in artificial intelligence, have increased the reliability
and accuracy of medical imaging, thus driving further demand in
global healthcare. Conversely, the market is somewhat inhibited by
the high cost of current medical imaging systems.
In 2023, X-ray systems held approximately 32% of the market
share, while MRI systems accounted for around 18%. Our estimates
indicate that over 20% of all diagnostic imaging scans are related
to limbs. As a result, the combined addressable market for
Magnetica and Adaptix in medical imaging is approximately $3
billion, in theory. However, it's important to note that the actual
addressable market is smaller, since both businesses have chosen
not to target sales to hospitals. Instead, they are focusing on
deploying their products in specialised clinics, where the product
attributes align closely with the specific needs of these
establishments.
Additionally, both Magnetica and Adaptix have plans to expand
into other imaging markets, notably the veterinary sector. This is
in response to the lack of dedicated products in this area, which
has hindered the widespread use of imaging systems in veterinary
practices. By targeting these specialised markets and addressing
their unique requirements, both companies aim to further grow their
market share and create a disruptive impact in the medical and
veterinary imaging industries.
End User/Aftermarket
Diagnostic imaging is dominated by a handful of manufacturers,
including GE, Siemens, Philips and Canon, 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 imaging aftermarket at
this time.
Operations
Operational Key Performance Indicators (KPI's) for continuing
operations
2023 2022
Percentage of total continuing revenue deriving
from aftermarket (AM) sales (%) 40.5 42.0
Customer quality - defect free deliveries
(%) 91.3 93.6
Customer on-time in-full deliveries (%) 79.9 80.5
Annualised staff turnover including restructuring
(%) 18.5 17.4
Health and Safety incidents per head per
annum 0.08 0.07
Environmental incidents per annum 0 0
Although total AM sales increased strongly in the period, the
percentage of total sales was reduced, due to a much larger
increase in OEM sales in FY23.
Customer quality and on time in full (OTIF) deliveries both
dipped slightly, as supply chain disruptions continued to impact
our operations in all countries. These disruptions have led us to
carry more stock than ideal, to mitigate delivery delays. There are
some early signs of this situation easing in the new FY.
Annualised staff turnover went up slightly, driven mainly by a
larger than average number of retirements in the year.
H&S incidents per head per annum was up very slightly at
0.08. The increase was due to a number of minor incidents at
HES/HEVAC post-acquisition. After we integrated the business into
Ormandy's main site, H&S incidents reduced back to normal
levels.
As in 2023, there were zero environmental incidents recorded in
the Group.
EPM Division - Energy
The EPM division, comprises Hayward Tyler (HT) and Energy Steel
(ES), with Slack and Parr being added post period end. The main
divisional priorities remain: strengthening the aftermarket sales
and capabilities and; maximising opportunities in the nuclear life
extension market.
The division's results further improved in the period, though
there was a notable increase in OEM sales. Some adverse
supply-chain disruption effects continued throughout the year but
the impact was less pronounced than in the prior year.
At HT Luton, our aftermarket activities are experiencing
significant demand, notably in servicing of third-party equipment.
In the hydrocarbons sector, elevated enquiries and orders continued
throughout the year. HT Luton received a follow up GBP3.3m contract
from Forsmark nuclear power station in Sweden and other nuclear
life extension orders have followed elsewhere. The team also
secured further defence related orders from Rolls Royce, for the UK
MoD.
Regarding the HT Luton site redevelopment, there has been little
recent progress, as the increase in interest rates in the UK has
dampened construction interest for the time being.
HT Inc, located in Vermont (USA), has maintained a strong order
intake in the nuclear life extension market, both domestically in
the USA and with KHNP in South Korea. Despite the challenges, HT
Inc is making significant progress in exploring new R&D
opportunities, particularly in the field of next-generation nuclear
power. These endeavours are advancing steadily, and we have secured
further orders from TerraPower after the close of the previous
period. This indicates the positive direction our Company is moving
towards, reaffirming our commitment to innovation and growth in the
nuclear industry.
Our Fluid Handling business in Scotland maintained its
consistency, with another good performance in the period. The
Transkem mixer business, acquired in the prior year, contributed
strongly to the results.
The acquisition of the assets of Slack and Parr, in Kegworth, UK
(post period end) adds another significant specialist pumps
capability to the divisional armoury. S&P specialise in
precision gear pumps, used in a variety of applications - eg - in
the production of textile fibres. Initial activities will focus on
stabilising S&P's UK operations, which are disordered and
inefficient, following the administration process.
HT Kunshan (China) had another good year, with a number of new
orders being received and delivered and a strong pipeline,
resulting from the Chinese government initiative to reduce
emissions from coal fired power stations. This has given HT a new
product line to pursue in the short to medium term.
HT India had a better year, having previously suffered from
disruptions due to Covid-19. So, the business performance was back
to normal in the period.
Energy Steel ('ES') in Michigan (USA), delivered an improved set
of results from the previous year. The business has been winning
new orders from a broader market footprint, including first orders
from TerraPower. ES has also improved its on time delivery
performance in the year.
PSRE Division - Energy, safety and security
PSRE had another very solid year, albeit still impacted by
supply chain disruptions and order delays, as seen elsewhere in the
Group.
Booth performed well and has sustained a record order book,
including the HS2 GBP36m contract, which has now entered the
production phase. We have successfully rebuilt Booth into a leader
in its high integrity doors market niches, both in the UK and
internationally. We continue to make good progress in building an
aftermarket business at Booth, where we see strong growth
potential.
Metalcraft's progress with the Sellafield 3M3 boxes was good
overall, as the production phase two of the contract continues. The
contract value was boosted to GBP70m in phase two (previously
GBP50m) with circa 1,000 boxes to be delivered over the next six
years. Metalcraft is the only supplier to transition to phase two
of the contract. Frustratingly, the next 3M3 box contract tender
remains on the horizon, with uncertain timing but we are very well
placed to pursue this contract and it does not impact on our
forecasts. Metalcraft China was sold to a local Chines manufacturer
for, GBP1.0m, at the end of the period. Following our exit from MRI
third party component manufacture, we did not have a strategic use
for this facility but we were pleased to secure this sale and
sustain the employment of all of our former colleagues there.
Ormandy's management team was strengthened during the year and,
as a result, its performance measurably improved. During the second
half of FY23, we acquired the assets of local competitor HES/HEVAC
for GBP0.9m and transferred its 30 employees mainly into Ormandy's
Bradford site. The integration has gone smoothly, and the enhanced
market offering of the combined business, reinforces Ormandy's
prospects, with a strong order book already evident.
Composite Products had a solid year, with stable deliveries to
Rapiscan for package scanning equipment and post period end secured
further orders for Rapiscan.
The Group continued to invest in Magnetica in the period and, as
at 31 August 2023, currently owns 74.8% of the business. Magnetica
is continuing to work towards new niche products in Magnetic
Resonance Imaging (MRI) We are making good progress on this
exciting project, with the first orthopaedic product expected to be
launched during FY24 and 510(k) market entry approval from the US
FDA to follow in the first half of calendar 2024. Magnetica will
also continue to work on products for the adjunct Nuclear Magnetic
Resonance (NMR) market, via Tecmag Houston and on superconducting
magnets for physics applications, via SciMag in the UK.
During the period, we made a further investment in Adaptix
(Oxford, UK) worth GBP4.0m in total. Post period end, we agreed to
buy the remaining shares in Adaptix for GBP2.7m and also took on
existing debts of GBP2.1m, repaid debt of GBP3.3m.
The plans of Adaptix and Magnetica are convergent. We are
seeking to exploit this parallel track, to optimise costs in both
businesses and to improve market penetration. In the period,
Adaptix began to place first products in the veterinary imaging
market and also received its 510(k) approval from the FDA, to allow
sales of its product for the orthopaedic market in the USA.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators
to monitor the business, as set out below (all items are "from
continuing operations", after restating for discontinued Metalcraft
China in FY23).
Revenue: 17.5% increase - underlying organic growth
continues
Overall, Group continuing revenue increased to GBP116.4m (2022:
GBP99.1m), driven largely by organic growth in the EPM and PSRE
divisions. Revenue included GBP2.9m stemming from HES/HEVAC,
acquired in the period.
Gross margin: Stable despite some OEM/AM mix effects in the
year.
Group gross margin reduced slightly to 32.9% (2022: 34.1%)
partly due to the relatively higher percentage of OEM sales in the
year, versus FY22.
Profit margin: Another improvement in results, despite global
disruption
Adjusted EBITDA (note 2) increased to GBP13.7m (2022: GBP12.4m).
PSRE was boosted by strong results across the division, with robust
results at Booth. The profit margins in the EPM division also
continued to improve, as market conditions stabilised somewhat. In
FY23, the overall increase in revenue resulted in a slight decrease
in the split of AM and OE, with a corollary slight reduction in
EBITDA margin percentages, along with the initial HES Revenue being
just above break even.
Operating profit was GBP8.0m (2022: GBP7.2m), in line with the
EBITDA improvement seen above, and lower exceptional costs.
Profit was suppressed by GBP0.4m in the year, by the Board's
proactive decision to make an ex gratia payment of GBP500 each to
all employees in December 2023, to help with the cost of living in
various countries.
Tax: Future profits and cash protected by available losses
The effective rate of taxation at Group level was a 16.7% (2022:
13.9%) tax charge. A US tax rebate in FY23 (note 3) kept the charge
lower than expected and the use of brought forward losses in the
UK. The tax position will be aided further in the coming years by
utilisation of losses in the UK. We continue to be cautious, not
recognising all of the potential trading tax losses in the UK.
Adjusted diluted Earnings per Share (EPS) increased
Adjusted diluted earnings per share from continuing operations
(note 4) increased to 23.4p (2022: 21.6p) reflecting the underlying
growth in results, offset by a higher tax charge due to the
increase in the UK tax rate (FY22 had a lower overall tax charge
following a US tax rebate). Adjusted diluted earnings per share
attributable to shareholders reduced to 19.9p (2022: 21.8p), due to
the discontinued losses for the trading and disposal of Metalcraft
China.
Basic and diluted earnings per share attributable to
shareholders from continuing activities decreased to 15.7p (2022:
18.9p) and to 15.3p (2022: 18.3p), due to the discontinued losses
for the trading and disposal of Metalcraft China.
Funding and Liquidity: Ongoing strong net cash position
Net cash (including IFRS16 debt) at 31 May 2023 was GBP9.1m.
Excluding IFRS16 debt, Net cash was GBP13.0m, (31 May 2022: Net
cash (including IFRS16 debt) was GBP13.3m and excluding IFRS16 debt
was GBP16.7m). The cash flows generated from the strong underlying
profits were subdued by a GBP2.3m working capital outflow, mainly
due to the delayed timing of various contracts, carrying increased
stock due to supply chain disruption and working capital outflow
for the HES/HEVAC acquisition , resulting in an operating cash
inflow of GBP9.6m for the year (2022: GBP3.7m). In addition to
GBP4.0 m invested in Adaptix, GBP5.3m was invested in development
costs primarily in relation to: Magnetica's compact helium-free MRI
system GBP3.7m; HTI Bearings GBP1.1m. A further GBP3.3m into
property plant and equipment, GBP1.5m lease renewals at Magnetica,
HTI and Kunshan , FH Doosan machine GBP0.2 m ) and loan repayments
of GBP2.8m, with the Group still in a strong net cash position .
The Directors consider that the Group has sufficient financial
resources to deliver strategy, so the Group is actively looking for
further value enhancing opportunities.
Dividend: Progressive dividend policy continues
A final dividend of 2.8p per share is proposed, making a total
dividend of 4.5p per share (2022: 4.2p). The dividend will be paid
on 8 December 2023, to shareholders on the register at 27 October
2023.
People
There were no changes at Board, or divisional management level
in the period.
The next tier management teams in each of the three divisions
continue to be strengthened, with a number of key appointments
being made in the year, notably in Medical, which is growing quite
quickly. Skills availability remains a challenge. However, we do
not expect to be unduly constrained by shortages, although the
global economic situation caused wage inflation across the Group
and made recruitment more difficult. We continue to invest
significant effort in developing skills in-house, through
structured apprenticeship programmes and graduate development
plans. The Group continues to be recognised nationally for the
strength of its apprenticeship training schemes.
Environmental, Social and Governance (ESG) Report
Avingtrans believe that operating in a safe, ethical and
responsible manner is at the heart of creating sustainable value
for all our stakeholders.
Environmental
As the Group is listed on the LSE AIM market, we fall within the
newly introduced Climate-Related Financial Disclosures ("CRFDs")
regime. The 4 pillars of this regime are governance, strategy,
metrics and targets, and risk management.
Governance
Our Board oversees our approach to sustainability, including
climate change. Under the board sits a Sustainability Committee
represented by employees from across the Group. The Committee is
responsible for promoting and implementing environmental programmes
and collecting and monitoring environmental data. The
Sustainability Committee provides regular updates and briefings to
the Board.
Strategy
In 2021, we reassessed our approach to sustainability, with a
view of integrating a sustainability strategy into our core
business activities, aligning ourselves with the UN's Sustainable
Development Goals (SDGs). From our sustainability assessment we
identified 2 principal areas of environmental focus, these are:
-- Operational eco-efficiency
-- Development of new technologies
Operational eco-efficiency looks at improvements we can make at
a site level, including reducing the manufacturing footprint of our
sites, investment in improvements, and establishing a culture which
promotes carbon reduction.
Development of new technologies allows us to benefit from
opportunities designed to mitigate issues associated with climate
change. The Group can benefit from its advanced engineering
capabilities and world-class technologies to develop new products
and services that support low carbon or reduced emissions
requirements.
Risk management
Our approach to identifying, assessing and managing
environmental risks, including climate related risk, is embedded
within our approach to risk management. Environmental risks may
present as financial or non-financial risks depending on the extent
to which their impacts can be quantified, and how they have been
classified.
Climate change and environment is a principal risk for the
Group.
Climate-related risks and opportunities
A summary of the climate-related risks and opportunities
identified as having a potentially material impact on the Group,
and our associated controls, includes:
Shift to renewables
Most countries we sell into are moving away from fossil fuels
towards renewables.
Demand for our hydrocarbon range of products could be adversely
impacted. Conversely, we could see greater opportunities for our
nuclear products.
The Group has been investing in products for next generation
nuclear, including fusion, molten-salt fast reactors, and small
modular reactors.
Extreme weather events
Disruption could be caused by a range of events, for example,
flooding, extreme temperatures, and drought.
Extreme temperatures will increase the energy required to heat
or cool our facilities and in extreme cases may cause site closures
and a range of logistical issues.
We have seen such issues rising across the Group in recent
years, for example record levels of smog in Delhi, India, because
of drought and industrial emissions.
Levels of regulation
The Group operates in a highly regulated environment across many
jurisdictions and is subject to regulations relating to
environmental factors including, but not limited to, climate
change, therefore consideration of current and emerging regulation
within our environmental management system is key to mitigating
risk. Identified regulatory risks include energy-related taxes and
the increased costs of compliance with energy-related schemes.
Statement of carbon emissions -compliance with Streamlined
Energy and Carbon Reporting (SECR)
We report greenhouse gas Scope 1, 2 emissions in line with the
Streamlined Energy and Carbon Reporting (SECR) regulations.
Given the Group makes regular disposals and acquisitions we do
not consider absolute carbon emissions to be an appropriate method
for tracking emissions, instead we focus on carbon intensity
ratios.
We have adopted a portfolio approach to tracking carbon
emissions. For the divisions operating in the energy sector (EPM
and PSRE) we monitor carbon emissions per GBPm of revenue. The
Medical division has a greater focus on product development, so
instead we focus on emissions per employee.
Sites track their energy usage from a number of sources,
including meter readings, mileage reports, and invoices, then
converts these inputs to energy (kWh) and carbon emissions (tCO2e)
using relevant conversion factors. Conversion factors are published
by the UK Department for Environment, Food and Rural Affairs and
the US Environmental Protection Agency (EPA).
Our energy usage and carbon emissions are:
2023 2022
EPM & MII Group EPM & MII Group
PSRE PSRE
-------------------------- ------ ----- ------ ------- ----- -------
Scope 1:
Gas 623 21 644 863 26 889
Oil 386 - 386 605 - 605
Distribution 13 2 15 30 - 30
Company vehicle
travel 14 - 14 13 6 19
-------------------------- ------ ----- ------ ------- ----- -------
1,036 23 1,058 1,511 32 1,543
Scope 2 - Purchased
electricity 843 203 1,046 901 204 1,105
-------------------------- ------ ----- ------ ------- ----- -------
Total emissions
tCO2e 1,879 226 2,104 2,412 236 2,648
-------------------------- ------ ----- ------ ------- ----- -------
Total energy consumption
mWh 9,441 544 9,986 11,204 560 11,764
Intensity metrics:
Average employees 673 59 732 634 44 678
Emissions tCO2e
per employee 2.8 3.8 2.9 3.8 5.4 3.9
Revenue (GBPm) 112.8 3.6 116.4 96.6 2.5 99.1
Emissions tCO2e
per GBPm of revenue 16.6 62.7 18.1 25.0 94.4 26.7
UK proportion
of:
Total emissions
tCO2e 79% 21% 73% 81% 25% 76%
Total energy consumption
mWh 77% 46% 75% 80% 50% 79%
In compliance with the SECR guidance, electricity emissions are
based on grid averages from the regions we operate. As entities
within the Group have transitioned to obtaining their power through
renewable energy providers our actual electrical emissions will be
lower.
The PSRE and EPM division's intensity target is to reduce its
tCO2e per GBPm of revenue. In the year tCO2e GBPm of revenue
improved by 33% to 16.6 (2022: 25.0). We expect to reduce revenue
intensity further in the next financial year.
The MII division's intensity target is to reduce its tCO2e per
employee. In the year tCO2e per employee has reduced 29% to 3.8
(2022: 5.4).
Integration of environmental considerations into our
Pinpoint-Invest-Exit strategy
The Group has expanded upon its environmental due diligence
procedures, which historically used to focus on potential
environmental liabilities. The focus has now shifted towards
identifying opportunities to improve business performance through
energy reduction initiatives.
We strongly believe that investing in next generation
manufacturing facilities and development of new technologies is key
to generating a sustainable business for the long term.
Demonstrating to potential buyers our environmental credentials and
technological capabilities is a key component of our Exit
strategy.
Progress in the year
Operational eco-efficiency
A significant proportion of the Group's energy consumption is
spent heating premises over the winter months. At some of the older
facilities energy in the winter months (December, January and
February) can be as much as 4 times higher than over summer (June,
July and August). A focused effort has been made to reduce winter
energy consumption. This includes the installation of new boilers,
additional insulation, automatic timers on heating, as well as
reducing the manufacturing footprint.
We carried out a Carbon whole life cycle impact assessment also
known as the LCA to measure embedded carbon in some of our key
products. This process was guided by the ISO 14067 Lifecycle Carbon
Assessment ("LCA") to measure and investigate improvement
opportunities that can cut carbon emissions. On the back of this
research, we have implemented a number to our products and
processes including:
-- Selection of higher quality materials designed to increase
the useful life of products and reduce maintenance.
-- Introduction of reusable packaging and packaging which can be fully recycled.
-- Negotiating with customers to make fewer, larger shipments of
products in order to reduce delivery emissions.
Development of new technologies
Next generation nuclear: Molten Chloride Fast Reactor
Our US Hayward Tyler business has been developing
high-temperature molten salt pumps, destined for a state-of-the-art
Integrated Effects Test (IET) facility, under development by
Southern Company and TerraPower, to advance development of the
Molten Chloride Fast Reactor (MCFR). This is a transformational,
fourth-generation, molten salt nuclear technology, designed to
enable low-cost, economywide decarbonization. Located at
TerraPower's Everett, Washington facility, the IET is a
non-nuclear, externally heated multi-loop system, intended to test
and validate integrated operation of MCFR systems, as well as
demonstrate multiple auxiliary MCFR functions.
During the year, the Group secured an extension to for the
continued development of next generation molten salt pumps, under
the Advanced Reactor Demonstration Program.
Nuclear energy and decommissioning represent 27% of the Group's
revenues in the year. The Group believe that working on next
generation nuclear projects including MCFR in the US, ITER in
France, and Small Modular Reactors ("SMRs") in the UK, will
strengthen the Group's long-term position in the nuclear
industry.
Helium-free magnets
Existing MRI systems rely on liquid helium, to cool the
superconducting magnets at the heart of each system. Helium is a
scarce, non-renewable resource, mostly obtained as a by-product of
oil extraction. Therefore, in our new compact MRI designs, we are
seeking to take advantage of the smaller system footprint, to
enable us to rely on mechanical cooling only, thus virtually
eliminating use of helium in these systems.
An update on the status of the progress on the MRI development
can be found in Medical Division review on page 10.
Social
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 gender, 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 been rolling-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.
Apprenticeships and training
All larger group locations are running apprenticeship schemes
for young people, both to act as socially responsible employers and
to optimise the demographics of our workforce over the mid to long
term.
The apprentice training school, based at Metalcraft, Chatteris
is now fully operational. We are partnered with West Suffolk
College (WSC) as the operator and training provider at the centre,
which plans to take on between 80 and 130 students each year.
Construction of the centre was funded through a GBP3.16 million
grant from Cambridgeshire and Peterborough Combined Authority.
The Group continues to be recognised nationally for the strength
of its apprenticeship training schemes. At 31 May 2023, the Group
had 29 apprentices.
Health, safety, and wellbeing
The Group takes H&S matters and its related responsibilities
very seriously.
As regular acquirers of businesses, we find different levels of
capability and knowledge in different situations. A frequent
investment need in smaller acquisitions is to spread H&S best
practice from other Group businesses and bring local processes up
to required standards. Larger acquisitions usually have well
developed H&S processes and we seek to learn from these in
other business units.
Employee equality, welfare and engagement are critical for
developing our key asset. We focus on pro-active actions,
including, internal training, certifications, and employee
engagement through listening, survey and involvement.
Our Health and Safety KPIs can be found in the key performance
indices section of the strategic report (page 8). Health and Safety
incidents per head per annum rose to 0.08 in the year (2022: 0.07)
driven by the acquisition of the HES/HEVAC businesses. Excluding
the new acquisition incidents per head per annum would have
remained flat at 0.07. At Board level, Les Thomas has H&S
oversight and he conducts inspections with local management, as
appropriate.
During the year, there have been no fatalities or serious
injuries at any of our sites.
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, principally in
the Energy and Medical and Industrial sectors, with a successful
profitable growth record, underpinned by our 'PIE' strategy. Recent
acquisitions will provide further opportunities for the Group to
build sustainable value for investors in resilient market niches.
We will continue to be prudent and seek to crystallise value and
return capital when the timing is right, as part of the PIE
strategy implementation. 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. Magnetica's MRI product development is proceeding to plan,
with an expected launch of the orthopaedic product later in 2023,
subject to FDA approval in the USA, expected during FY24. This
activity is fully complemented by the post-period end acquisition
of Adaptix and its disruptive 3D X-ray technology. The earlier
acquisitions of Booth and Energy Steel continued to recover well,
as demonstrated by the results in the period. The Group is in a
strong net cash position, so we are proactively pursuing potential
PIE prospects, with the ability to capitalise on any suitable
strategic opportunities. Our value creation targets continue to be
accomplished as planned and are underpinned by a conservative
approach to debt.
The energy divisions have a strong emphasis on the thermal
power, nuclear and hydrocarbon markets and aftermarkets. The
medical division is focused on compact, helium-free MRI systems and
compact point of care 3D X-ray systems, which the Board believes
could create significant future shareholder value. To drive
profitability and market engagement, each division has a clear
strategy to support end-user aftermarket operations, servicing its
own equipment and (where pertinent) that of third parties, to
capitalise on the continued market demand for efficient, reliable
and safe facilities.
The Russia-Ukraine conflict and resulting inflationary effects
on the global economy is still a significant risk factor. However,
we have taken effective cost and impact mitigation actions so far,
to limit any potential downside and we will continue to be
vigilant.
Despite the current global macroeconomic environments, our
markets continue to develop and M&A opportunities remain a
priority for us. Businesses like ours can command high valuations
at the point of exit. The Board remains cautiously 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 create superior shareholder value, whilst maintaining a
prudent level of financial headroom, to enable us to endure any
subsequent headwinds.
The Strategic Report was approved by the Board and signed on its
behalf by:
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
26 September 2023 26 September 2023 26 September 2023
Consolidated Income Statement Note 2023 2022
GBP'000 GBP'000
Revenue 1 116,437 99,075
Cost of sales (78,137) (65,242)
--------- ---------
Gross profit 38,300 33,833
Distribution costs (4,458) (3,630)
Administrative expenses (25,866) (23,018)
------------------------------------------------------------------------------------------ ---- --------- ---------
Operating profit before amortisation of acquired intangibles, other non-underlying items
and exceptional items 9,452 8,494
Amortisation of acquired intangibles (993) (869)
Share based payment (237) (188)
Acquisition costs (14) (29)
Restructuring costs (232) (93)
Other exceptional items - (130)
------------------------------------------------------------------------------------------ ---- --------- ---------
Operating profit 1 7,976 7,185
Finance income 109 176
Finance costs (609) (386)
--------- ---------
Profit before taxation 7,476 6,975
Taxation 3 (1,246) (971)
Profit after taxation from continuing operations 6,230 6,004
========= =========
Profit after taxation from discontinued operations (1,168) 57
Profit for the financial year 5,062 6,061
========= =========
Profit is attributable to:
Owners of Avingtrans PLC 5,194 6,478
Non-controlling interest (132) (417)
Total 5,062 6,061
========= =========
Earnings per share:
From continuing operations
- Basic 4 19.4p 18.7p
-Diluted 4 18.9p 18.1p
From continuing and discontinuing operations
-Basic 4 15.7p 18.9p
-Diluted 4 15.3p 18.3p
Consolidated Statement of Comprehensive Income
2023 2022
GBP'000 GBP'000
Profit for the year 5,062 6,061
Items that will not subsequently be reclassified to profit or loss
Remeasurement of defined benefit liability (1,388) 95
Income tax relating to items not reclassified 347 (24)
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations (579) 1,445
Total comprehensive income for the year attributable to equity shareholders 3,442 7,577
======== ========
Consolidated Balance Sheet Note 2023 2022
GBP'000 GBP'000
Non current assets
Goodwill 21,585 21,420
Other intangible assets 18,790 15,675
Property, plant and equipment 23,612 25,239
Deferred tax 666 1,544
Unlisted Investments 8,000 4,000
Pension and other employee obligations 526 1,688
---------- ----------
73,179 69,566
Current assets
Inventories 12,656 11,759
Trade and other receivables: falling due within one year 49,691 46,817
Trade and other receivables: falling due after one year 1,550 1,579
Current tax asset 618 686
Cash and cash equivalents 17,717 24,287
---------- ----------
82,232 85,128
Total assets 155,411 154,694
========== ==========
Current liabilities
Trade and other payables (32,140) (29,629)
Lease liabilities (1,503) (1,605)
Borrowings (3,077) (5,497)
Current tax liabilities (1,303) (710)
Provisions (1,315) (1,770)
Derivatives (15) -
Total current liabilities (39,353) (39,211)
========== ==========
Non-current liabilities
Borrowings (669) (762)
Lease liabilities (3,328) (3,097)
Deferred tax (3,238) (4,465)
Other creditors (368) (1,342)
---------- ----------
Total non-current liabilities (7,603) (9,666)
---------- ----------
Total liabilities (46,956) (48,877)
========== ==========
Net assets 108,455 105,817
========== ==========
Equity
Share capital 1,612 1,607
Share premium account 15,979 15,693
Capital redemption reserve 1,299 1,299
Translation reserve 1,170 825
Merger reserve 28,949 28,949
Other reserves 1,457 1,457
Investment in own shares (4,235) (4,235)
Retained earnings 59,811 58,223
Total equity attributable to equity holders of the parent 106,042 103,818
========== ==========
Non-controlling interest 2,413 1,999
========== ==========
Total equity 108,455 105,817
========== ==========
Consolidated Statement of Changes in Equity
at 31 May 2023
Capital Total
Share redemp- Trans- Invest-ment Attributable Non-controlling
Share premium tion Merger lation Other in own Retained owners of interest Total
capital account reserve reserve reserve reserves shares earnings the Group Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2021 1,599 15,347 1,299 28,949 (732) 1,457 (4,235) 53,614 97,298 1,665 98,963
Ordinary shares
issued 8 346 - - - - - - 354 - 354
Dividends paid - - - - - - - (1,265) (1,265) - (1,265)
Share-based
payments - - - - - - - 188 188 - 188
-------- ------- ------- ------- ------- -------- ------------ ---------- ------------- ----------------- --------
Total
transactions
with owners 8 346 - - - - - (1,077) (723) - (723)
Profit for the
year - - - - - - - 6,478 6,478 (417) 6,061
Investment in
subsidiary with
non-controlling
interest - - - - 112 - - (863) (751) 751 -
Other comprehensive income
Actuarial gain for the year
on pension scheme - - - - - - - 95 95 - 95
Deferred tax on actuarial
movement on pension scheme - - - - - - (24) (24) - (24)
Exchange gain - - - - 1,445 - - - 1,445 - 1,445
----- ------ ----- ------ ----- ----- -------- ------- -------- ------ -------
Total comprehensive income
for the year - - - - 1,557 - - 5,686 7,243 334 7,577
----- ------ ----- ------ ----- ----- -------- ------- -------- ------ -------
Balance at
31 May 2022 1,607 15,693 1,299 28,949 825 1,457 (4,235) 58,223 103,818 1,999 105,817
===== ====== ===== ====== ===== ===== ======== ======= ======== ====== =======
Consolidated statement of changes in equity (continued)
at 31 May 2023
Capital Total
Share redemp- Trans- Invest-ment Attributable
Share premium tion Merger lation Other in own Retained owners of Non-controlling Total
capital account reserve reserve reserve reserves shares earnings the Group interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2022 1,607 15,693 1,299 28,949 825 1,457 (4,235) 58,223 103,818 1,999 105,817
Ordinary shares
issued 5 286 - - - - - - 291 - 291
Dividends paid - - - - - - - (1,331) (1,331) - (1,331)
Share-based
payments - - - - - - - 237 237 - 237
-------- ------- ------- ------- ------- -------- ------------ --------- ------------- ----------------- --------
Total
transactions
with owners 5 286 - - - - - (1,094) (803) - (803)
Profit for the
year - - - - - - - 5,194 5,194 (132) 5,062
Investment in
subsidiary with
non-controlling
interest - - - - 924 - - (1,470) (546) 546 -
Other
comprehensive
income
Actuarial gain
for the year on
pension scheme - - - - - - - (1,388) (1,388) - (1,388)
Deferred tax on
actuarial
movement on
pension scheme - - - - - - - 347 347 - 347
Exchange gain - - - - (579) - - - (579) - (579)
-------- ------- ------- ------- ------- -------- ------------ --------- ------------- ----------------- --------
Total
comprehensive
income for the
year - - - - 345 - - 2,683 3,028 414 3,442
-------- ------- ------- ------- ------- -------- ------------ --------- ------------- ----------------- --------
Balance at
31 May 2023 1,612 15,979 1,299 28,949 1,170 1,457 (4,235) 59,812 106,043 2,413 108,455
======== ======= ======= ======= ======= ======== ============ ========= ============= ================= ========
Consolidated Cash Flow Statement for the year ended 31 May 2023 Note
2023 2022
GBP'000 GBP'000
Operating activities
Cash flows from operating activities 30 10,682 4,173
Finance costs paid (620) (388)
Income tax (paid)/received (331) 203
Contributions to defined benefit plan (164) (282)
--------- --------
Net cash inflow from operating activities 9,567 3,706
--------- --------
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 36 (852) (582)
Investment in unlisted undertaking 16 (4,000) (4,000)
Disposal of a subsidiary undertaking, net of cash disposed 36 877 -
Finance income 109 176
Purchase of intangible assets (5,401) (1,996)
Purchase of property, plant and equipment (3,291) (2,989)
Proceeds from sale of property, plant and equipment 34 44
--------- --------
Net cash used in from investing activities (12,524) (9,347)
Financing activities
Equity dividends paid (1,331) (1,265)
Repayments of bank loans (2,843) (468)
Repayment of leases (1,771) (1,486)
Proceeds from issue of ordinary shares 291 355
Proceeds from borrowings 2,254 2,493
--------- --------
Net cash outflow from financing activities (3,400) (371)
Net decrease in cash and cash equivalents (6,356) (6,012)
Cash and cash equivalents at beginning of year 23,902 29,736
Effect of foreign exchange rate changes on cash (160) 178
--------- --------
Cash and cash equivalents at end of year 19 17,386 23,902
--------- --------
Notes to the financial statements
1 Segmental analysis
Energy Energy Medical Unallocated
Year ended 31 May 2023 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 21,389 45,413 3,595 - 70,397
After Market 43,200 2,806 34 - 46,040
---------- ---------- --------- --------------- ----------
Revenue 64,589 48,219 3,629 - 116,437
========== ========== ========= =============== ==========
Operating profit/(loss) 5,564 4,581 (1,010) (1,159) 7,976
Net finance (expense)/income (422) (74) (39) 35 (500)
Taxation (charge)/credit (645) (666) (17) 82 (1,246)
Profit/(loss) after tax from continuing operations 4,497 3,841 (1,066) (1,042) 6,230
========== ========== ========= =============== ==========
Segment non-current assets 42,030 12,106 11,043 8,000 73,179
Segment current assets 48,933 22,995 2,544 7,760 82,232
---------- ---------- --------- --------------- ----------
90,963 35,101 13,587 15,760 155,411
Segment liabilities (28,899) (13,635) (4,073) (349) (46,956)
---------- ---------- --------- --------------- ----------
Net assets 62,064 21,466 9,514 15,411 108,455
========== ========== ========= =============== ==========
Non-current asset additions
Intangible assets 1,351 363 3,848 - 5,562
Tangible assets 1,773 1,048 470 - 3,291
---------- ---------- --------- --------------- ----------
3,124 1,411 4,318 - 8,853
========== ========== ========= =============== ==========
Other income statement items:
Depreciation and amortisation (2,528) (1,452) (314) - (4,294)
========== ========== ========= =============== ==========
Unallocated assets/ (liabilities) consist primarily of
interest-bearing assets and liabilities and income tax assets and
liabilities.
Segmental analysis has been revised for FY22 following the
segment move from PSRE to EPM for Hayward Tyler Fluid Handling.
Energy Energy Medical Unallocated
Year ended 31 May 2022 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 16,188 38,309 2,426 - 56,923
After Market 39,938 2,183 31 - 42,152
---------- ---------- --------- --------------- ----------
Revenue 56,126 40,492 2,457 - 99,075
========== ========== ========= =============== ==========
Operating profit/(loss) 5,005 4,543 (1,291) (1,072) 7,185
Net finance (expense)/income (126) (56) (23) (5) (210)
Taxation (charge)/credit (1,036) (464) 149 380 (971)
Profit/ (loss) after tax from continuing operations 3,843 4,023 (1,165) (697) 6,004
========== ========== ========= =============== ==========
Segment non-current assets 44,782 13,206 7,578 4,000 69,566
Segment current assets 45,618 19,191 1,828 18,491 85,128
---------- ---------- --------- --------------- ----------
90,400 32,397 9,406 22,491 154,694
Segment liabilities (25,260) (17,376) (3,539) (2,702) (48,877)
---------- ---------- --------- --------------- ----------
Net assets 65,140 15,021 5,867 19,789 105,817
========== ========== ========= =============== ==========
Non-current asset additions
Intangible assets 500 147 1,615 - 2,262
Tangible assets 962 1,429 598 - 2,989
---------- ---------- --------- --------------- ----------
1,462 1,576 2,213 - 5,251
========== ========== ========= =============== ==========
Other income statement items:
========== ========== ========= =============== ==========
Depreciation and amortisation (2,541) (1,032) (367) - (3,940)
========== ========== ========= =============== ==========
1 Segmental analysis (continued)
Geographical
The following tables provides an analysis of the Group's revenue
by destination and the location of non-current assets (excluding
deferred tax assets and defined benefit pension surplus) by
geographical market:
2023 2022 2023 2022
Non-current Non-current
Revenue Revenue Assets Assets
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 53,076 45,144 34,954 31,498
Europe (excl. UK) 7,411 6,695 - -
United States of America 28,955 23,383 27,473 27,933
Africa & Middle East 2,705 1,633 - -
Americas & Caribbean (excl. USA) 5,059 3,767 - -
China 10,297 9,057 723 1,771
Asia Pacific (excl. China) 8,934 9,396 8,837 5,132
116,437 99,075 71,987 66,334
========= ======== =========== ===========
2 Adjusted Earnings before interest, tax, depreciation and amortisation
2023 2022
GBP'000 GBP'000
Profit before tax from continuing operations 7,476 6,975
Share based payment expense 237 188
Acquisition costs 14 29
Restructuring costs 232 93
Other exceptionals - 130
Loss/(gain) on derivatives 14 (144)
Amortisation of intangibles from business combinations 993 869
------- -------
Adjusted profit before tax from continuing operations 8,966 8,140
Finance income (109) (176)
Finance cost 609 386
Gain/(loss) on derivatives (14) 144
------- -------
Adjusted profit before interest, tax and amortisation from business combinations ('EBITA') 9,452 8,494
Depreciation 3,720 3,434
Amortisation of other intangible assets 444 374
Amortisation of contract assets 130 132
Adjusted Earnings before interest, tax, depreciation and amortisation ('EBITDA') from continuing
operations 13,746 12,434
======= =======
The Directors believe that the above adjusted earnings are a
more appropriate reflection of the Group performance.
All costs noted above, apart from the share based payment
expense, depreciation and amortisation of intangibles had a
reduction in the cashflow in the year. The tax impact on the above
costs is relatively immaterial.
3 Taxation
2023` 2022
GBP'000 GBP'000
Continuing operations
Current tax
Corporation tax - current year - -
Corporation tax - prior year 77 141
Overseas tax - current year 970 225
Overseas tax - prior year 210 (480)
-------- --------
Total current tax 1,257 (114)
-------- --------
Deferred tax
Deferred tax - current year (15) 860
Deferred tax - prior year 4 170
Deferred tax - rate - 55
-------- --------
Total deferred tax (11) 1,085
Tax charge on continuing operations 1,246 971
======== ========
Tax (credit)/charge on discontinued operations - -
======== ========
Total tax (credit)/charge in the year 1,246 971
======== ========
Corporation tax is calculated at 20 % (2022: 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.
2023 2022
Number Number
Weighted average number of shares - basic 32,187,135 32,070,325
Share option adjustment 820,074 1,063,674
Weighted average number of shares - diluted 33,007,209 33,133,999
========== ==========
2023 2022
GBP'000 GBP'000
Profit from continuing operations 6,230 6,004
Share based payment expense 237 188
Acquisition costs 14 29
Restructuring costs 232 93
Other exceptionals - 130
Loss/(gain) on derivatives 14 (144)
Amortisation of intangibles from business combinations 993 869
Adjusted profit after tax from continuing operations 7,720 7,169
========== ==========
From continuing operations:
Basic earnings per share 19.4p 18.7p
Adjusted basic earnings per share 24.0p 22.4p
Diluted earnings per share 18.9p 18.1p
Adjusted diluted earnings per share 23.4p 21.6p
Earnings from discontinuing operations: (1,168) 57
From discontinuing operations
Basic earnings per share (3.6)p 0.2p
Adjusted basic earnings per share (3.6)p 0.2p
Diluted earnings per share (3.5)p 0.2p
Adjusted diluted earnings per share (3.5)p 0.2p
Earnings attributable to shareholders including non-controlling interest 5,062 7,226
Basic earnings per share 15.7p 18.9p
Adjusted basic earnings per share 20.4p 22.5p
Diluted earnings per share 15.3p 18.3p
Adjusted diluted earnings per share 19.9p 21.8p
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 Nil share options at 31 May 2023 (2022: Nil) 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:
2023 2022
GBP'000 GBP'000
Continuing operations
Profit before income tax from continuing operations 7,475 6,975
Loss before income tax from discontinuing operations before disposal (616) 57
Adjustments for:
Depreciation 3,720 3,675
Amortisation of intangible assets 444 374
Amortisation of intangibles from business combinations 993 869
Loss on disposal of property, plant and equipment - 44
Loss on disposal of intangible assets 373 -
Finance income (109) (176)
Finance expenses 609 393
Share based payment charge 237 188
Changes in working capital
Increase in inventories (729) (1,033)
Increase in trade and other receivables (3,628) (7,837)
Increase in trade and other payables 2,814 783
(Decrease)/increase in provisions (857) 32
Other non cash changes (44) (171)
Cash flows from operating activities 10,682 4,173
========= =========
2023 2022
GBP'000 GBP'000
Cash and cash equivalents
Cash 17,717 24,287
Overdrafts (331) (385)
17,386 23,902
========= =========
6 Acquisitions and disposals
Disposal of Metalcraft (Chengdu) Limited and Metalcraft
(Sichuan) Limited
On 31 May 2023, the Group disposed of 100% of its shares in
Metalcraft (Chengdu) Limited and Metalcraft (Sichuan) Limited.
Consideration was received in full during the year.
At the disposal date the carrying amount of net assets held in
the business was as follows:
GBP'000
Inventories 347
Trade and other debtors 331
Cash 147
Trade and other creditors (287)
-------
Total net assets 538
=======
Consideration comprises:
Cash consideration 1,024
Forgiveness of amounts owed by the disposal group (988)
-------
Total consideration 36
=======
Loss on disposal 502
=======
Cash consideration 1,024
Cash disposed of (147)
-------
Net cash inflow on disposal 877
=======
The loss on disposal is included in the loss for the year from
discontinued operations in the consolidated income statement.
2023 2022
GBP'000 GBP'000
Revenue 508 1,330
Other expenses (1,174) (1,273)
------- -------
(Loss)/profit before income tax (666) 57
Tax expense - -
------- -------
(Loss)/profit after income tax of discontinued operation (666) 57
Loss on disposal of net asset of discontinued operations (502) -
(Loss)/profit for the year from discontinued operations (1,168) 57
======= =======
Acquisition of HEVAC and HES
On 30 December 2022, the Group acquired the trade and assets of
HEVAC Limited ("HEVAC") a heating ventilation and air conditioning
solutions provider based in Elland, Yorkshire and the business and
assets of HeatExchangeSpares.com ("HES") a plates and gaskets
supplier, based in Watford. The acquisitions will complement the
Group's Ormandy Rycroft Engineering business and expand its product
range.
The details of the business combination are as follows:
GBP'000
Goodwill 188
Other intangible assets 162
Property, plant and equipment 28
Inventories 955
Trade and other receivables 2
--------------
Total assets 1,335
--------------
Trade and other payables (42)
Deferred tax liability (41)
Provisions (400)
--------------
Total liabilities (483)
--------------
Net assets 852
==============
Cash consideration 852
--------------
Net cash outflow from acquisition 852
==============
Consideration was paid in full during the financial year.
Goodwill of GBP188,000 is primarily the skills and expertise of
HEVAC and HES's workforce. Goodwill has been allocated to our PSRE
division cash generating unit.
HEVAC and HES contribution to the Group results,
post-acquisition are:
GBP'000
Revenue 2,862
Expenses (2,780)
-------
Profit before exceptional expenses and tax 82
Exceptional and moving expenses (218)
-------
Loss before tax (136)
Tax credit 22
-------
Loss after tax (114)
=======
Exceptional expenses comprise GBP14,000 relating to the
acquisition of HEVAC and HES, and GBP204,000 associated with moving
the operations to Group premises in Bradford.
We do not have access to the accounting records prior to the
acquisition so are unable to present the contribution the
acquisition to the Group were it to have been acquired at the start
of the financial year.
7 Net cash and gearing
2023 2022
GBP'000 GBP'000
Cash 17,717 24,287
Overdrafts (331) (385)
Loans (3,416) (5,874)
Lease liability - finance leases under IAS17 (951) (1,313)
-------- --------
Net cash - excluding IFRS 16 13,019 16,715
Lease liability - under IFRS 16 (3,879) (3,389)
Net cash 9,140 13,326
======== ========
Equity 108,455 105,817
======== ========
Net cash to equity ratio 8.4% 12.6%
======== ========
8 Post balance sheet events
Acquisition of Slack & Parr
On 4(th) August 2023, the Group acquired the trade and assets of
Slack & Parr from Slack & Parr Limited. As at this date
control over the business and its subsidiaries has been
obtained.
Slack & Parr is a manufacturer of specialist pumps and a
market leading supplier of high-precision gear metering pumps,
hydraulics flow dividers and industrial pumps.
The Group believes it can utilise its experience in business
turnaround as well as its specialist pump knowledge to improve
operational capabilities and drive higher margin on its revenue
contracts.
GBP2,600,000 cash consideration has been agreed, of which
GBP300,000 is contingent upon the audited financial statements of
overseas subsidiaries. All consideration will be settled in the
next financial year.
In addition to the consideration, the Group has agreed to adopt
the lease arrangements for the business including a lease on their
manufacturing facility and hire purchase agreements on machinery
and vehicles.
Overseas subsidiaries acquired:
Name Country of registration Ownership
Slack & Parr (International)
Inc USA 100%
------------------------- ----------
S&P Inc USA 100%
------------------------- ----------
S&P Hydraulics Inc USA 100%
------------------------- ----------
S&P Special Products Corp USA 100%
------------------------- ----------
Slack & Parr Shanghai (Joint
Venture) China 50%
------------------------- ----------
Slack & Parr Shanghai Manufacturing China 100%
------------------------- ----------
Acquisition of Adaptix
On 15 September 2023, the acquired the remaining 82.0% of the
shares in Adaptix Limited ("Adaptix"), bringing its ownership and
voting rights to 100%, thereby obtaining control.
Adaptix is an Oxford based emerging MedTech Company,
specialising in low-dose 3D portable x-ray imaging.
The Group believes that the potential acquisition will give us a
market leading position in novel medical imaging products, as
applied to several markets including veterinary and orthopaedic
imaging at the point of care.
Consideration is in the form of newly issued shares in
Avingtrans plc, which at the time of acquisition had a market value
of GBP2,700,000. In addition to the consideration, the Group has
adopted an estimated GBP2,100,000 of loan liabilities and repaid
GBP3,300,000 of debt.
9 Preliminary statement and basis of preparation
This preliminary statement, which has been agreed with the
auditors, was approved by the Board on 26 September 2023. It is not
the Group's statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
The Financial information set out in this announcement does not
constitute the Company's Consolidated Financial Statements for the
financial years ended 31 May 2023 or 31 May 2022 but are derived
from those Financial Statements. Statutory Financial Statements for
2022 have been delivered to the Registrar of Companies and those
for 2023 will be delivered following the Company's AGM. The
auditors Cooper Parry Group Limited have reported on the 2023
financial statements. Their report was unqualified, did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain statements under Section 498(2) or
(3) of the Companies Act 2006 in respect of the Financial
Statements for 2023.
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 UK 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, are set out in the statutory
financial statements for the year ended 31 May 2023.
10 Annual report and Accounts
The Report and Accounts for the year ended 31 May 2023 will be
available on the Group's website www.avingtrans.plc.uk on or around
9 October 2023. 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 held at
Shakespeare Martineau LLP, No1 Colmore Square, Birmingham, B4 6AA
on 16 November 2023 at 11:00am.
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END
FR FLFIDASIRFIV
(END) Dow Jones Newswires
September 27, 2023 02:00 ET (06:00 GMT)
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