REG - Avingtrans PLC - Interim Results
22/02/2023 07:00
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RNS Number : 6166Q Avingtrans PLC 22 February 2023
22 February 2023
Avingtrans Plc
("Avingtrans", the "Company", or the "Group")
Interim results for the six months ended 30 November 2022
Avingtrans PLC (AIM: AVG), the international engineering group which designs,
manufactures and supplies original equipment, systems and associated
aftermarket services to the energy, medical and industrial sectors, today
announces its interim results for the six months ended 30 November 2022.
Financial Highlights
• Group Revenue increased to £50.0m (2022 H1: £44.5m) in line with management
expectations.
• Gross Margin reduced marginally to 32.6% (2022 H1: 33.9%) as a result of OEM
versus aftermarket mix
• Adj.*EBITDA increased by 11.4% to £6.4m, as a result of higher revenues (2022
H1: £5.7m)
• Adj.*EBITDA margin 12.8% (2022 H1: 12.9%)
• Adj. Profit before tax £4.0m (2022 H1: £3.8m)
• Adj. Diluted Earnings Per Share from continuing operations increased to 10.8p
(2022 H1:10.2p)
• Cash inflow from operating activities of £4.1m (2022 H1: £4.0m)
• Net cash (excluding IFRS16 debt) at 30 November of £17.3m, (31 May 2022:
£16.7m) after further investments in Magnetica, Adaptix and working capital,
due to on-going supply chain disruption effects.
• Interim Dividend of 1.7 pence per share (2022 H1: 1.6 pence)
*Adjusted to add back amortisation of intangibles from business combinations,
acquisition costs and exceptional items and discontinued operations.
Operational Highlights
• Investments at Hayward Tyler, Energy Steel and Booth continue to bear fruit
• Order book: stronger than average across the Group:
- Order cover for FY23 is over 90%, at the end of January 2023
- Nuclear sector orders and prospects increasing, especially in the USA
• PIE strategy (Pinpoint-Invest-Exit) for organic growth and added value through
M&A
- Exciting potential for Medical in compact, helium-free MRI and 3D X-ray
systems
- Post period end - further Magnetica investment round completed, as planned
- Further £2.0m convertible loan investment in Adaptix 3D X-ray
- Planned exit of HT Luton site - continuing to pursue, but progress is slow
- Post period end, Ormandy acquired the assets of competitors HEVAC and HES
for £852k
Commenting on the results, Roger McDowell, Chairman, said:
"Our proven Pinpoint-Invest-Exit ("PIE") model has once again delivered robust
results in the period, exhibited by increased revenue and consistent gross
margins, despite inflationary pressures and supply chain instabilities, to
deliver a double digit % rising adjusted EBITDA.
"The Group continues to invest across its three divisions, with a focus on the
global energy and medical markets, to position them for maximum shareholder
value, by means of exits in the years to come. The MRI system development at
Magnetica and 3D X-ray system development at Adaptix are proceeding to plan.
We are witnessing on-going improvements in other business units, such as at
Booth, as again demonstrated by the first half results. Our value creation
targets continue to be accomplished as anticipated and are underpinned by a
conservative approach to debt, which we see as critical during a period of
on-going economic challenges.
"Our markets are continuously evolving and strategic M&A opportunities
remain a priority for Avingtrans. Businesses like ours can command high
valuations at the point of exit. Whilst the Board remains vigilant in the
current environment, we are confident about the current direction and
potential future opportunities across our markets.
"Strong order intake and timing of contract revenue recognition has provided
management with good visibility over H2 2023 revenue and profits, on-going
supply chain disruptions notwithstanding. Therefore, the Board remains
cautiously confident about achieving full year market expectations."
Enquiries:
Avingtrans plc 0135 469 2391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Broker) 020 7496 3000
Shaun Dobson / Alex Bond / Oliver Platts
IFC Advisory (Financial PR) 0203 934 6630
Graham Herring / Tim Metcalfe / Zach Cohen
Avingtrans 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 - 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 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
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving customers in
industrial markets.
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.
Chairman's Statement
We are once again pleased to be able to report a healthy first half
performance by Avingtrans, despite the combined impact of on-going supply
chain disruptions driven by the Russia / Ukraine conflict and the aftermath of
Covid. A solid revenue performance versus H1 FY22 has again been enhanced by
an improved EBITDA result, mainly due to increased revenue and profit in the
EPM division. The gross margin percentage reduced modestly year on year, due
to increased OEM sales in the mix. Gratifyingly, net cash was marginally ahead
of the year end position, even after further investments in Magnetica, Adaptix
and working capital expenditure, to mitigate supply chain issues. Order cover
for FY23 remains robust across all divisions.
Our proven Pinpoint-Invest-Exit ("PIE") model continues to deliver results,
with Booth and Energy Steel continuing to improve. Our medical imaging
strategy continues to advance with the Magnetica teams making good progress
with the design and build of our own compact MRI product for the orthopaedics
market. The prospects for this new entity are exciting and, post period end,
we committed to a further investment in Magnetica, which will take our overall
stake to over 74%. We also made a further investment of £2m in Adaptix, via a
loan note and, post period end, we were delighted to hear that their 3D X-ray
system for orthopaedics was awarded 510(k)(1) approval by the FDA in the USA.
As a corollary, we have now completed our exit from third party MRI component
manufacture in China. Also post period end, Ormandy acquired the assets of
local competitor businesses HEVAC and HES for £852k and will integrate this
business into its existing Bradford site.
The divisional management teams have shown fortitude in tackling the
significant supply chain disruption issues which have affected us across the
Group and we note some early signs of these issues easing. Our aftermarket
plans continue to progress positively in EPM and PSRE, as we seek to
outperform our competitors by winning a larger share of the installed base
service and support business, both for our products and those of third
parties. The improved end-user access provides a predictable and repeatable
pipeline and enhances profitability. We remain keen to maximise the revenue
opportunities arising from the aftermarket access afforded by our own
businesses and through partnership deals.
The Engineered Pumps and Motors (EPM) division saw a first half revenue
rebound by 16.8% year-on-year, despite the supply chain disruptions.
Divisional margins also increased with Energy Steel's performance being
sustained and further improvements expected by the year end. Although the
Luton site sale process has been frustrated, first by the pandemic and now by
the current economic challenges, the negotiations are on-going.
Process Solutions and Rotating Equipment (PSRE) reported more modest growth in
revenue in H1, with divisional EBITDA consistent year-on-year, following a
large jump in FY22. Booth's pleasing trajectory continues, with the record
order book being complemented by steadily increasing revenues and profits.
Year-on-year profits were also up modestly at Ormandy. The Sellafield 3M3 box
contract is now solidly into its second phase at Metalcraft, with a steady
flow of boxes being delivered each month. Composite Products' first half was
subdued but there was no material impact on the division.
Meanwhile, in the Medical division, Magnetica has made steady progress in the
development of its compact MRI system, which we expect to launch at the end of
2023. As noted above, post period end, we completed the latest fund-raising
process for Magnetica and we made a further investment in Adaptix. Both
businesses are targeting market sectors which currently lack effective MRI and
X-ray solutions, such as orthopaedics and veterinary applications.
Following another solid performance, the Board is declaring an increase in the
interim dividend of 6%, to 1.7 pence per share, demonstrating our continuing
commitment to provide long term shareholder returns. Our positive view of
Group prospects, supported by our prudent fiscal stance, underpins this
decision.
In conclusion, the Board would like to thank all Avingtrans employees for
their determination and resilience during another challenging period. We look
forward with guarded optimism and are enthusiastic about the period to come.
Note 1: A 510(k) is a premarket submission made to the FDA in the USA, to
demonstrate that the device to be marketed is as safe and effective
Roger McDowell
Chairman
21 February 2023
Strategy and business review
Group Performance
Avingtrans has a proven Pinpoint-Invest-Exit (PIE) business model, which
drives improvements in design, original equipment manufacturing (OEM) and
associated aftermarket services, affording the Group an improving margin mix,
both in the near and longer term. The Group has progressively shifted to a
product-based strategy over time, away from "build to print". Our Energy
divisions, comprising Engineered Pumps and Motors and Process Solutions and
Rotating Equipment, form the bulk of Avingtrans' operations. Effective
longer-term development of the Group's smaller Medical Imaging division is
also a core focus for management to create shareholder value.
Strategy
Avingtrans is an international precision engineering group, operating in
differentiated, specialist markets, within the supply chains of many of the
world's best known engineering original equipment manufacturers (OEMs), as
well as positioning itself as an OEM to end users. Our core strategy is to
build market-leading niche positions in our chosen market sectors - currently
focused on the Energy and Medical sectors. Over the longer term, our
acquisition strategy has enabled our businesses to develop the critical mass
necessary to achieve leadership in our chosen markets.
Our strategy remains consistent with previous statements. The Group's
unrelenting objective is to continue the proven strategy of "buy and build" in
regulated engineering markets, where we see consolidation opportunities,
potentially leading to significantly increased shareholder returns over the
medium to long term. At the appropriate time, we will seek to crystallise
these gains with periodic sales of businesses at advantageous valuations and
return the proceeds to shareholders. We call this strategy PIE -
"Pinpoint-Invest-Exit". Previous transactions, such as the disposal of Peter
Brotherhood in 2021, have clearly demonstrated the success of this approach,
producing substantial increases in shareholder value. We have built strong
brands and value from smaller constituent parts; we have demonstrated
well-developed deal-making skills and prudence in the acquisition of new
assets.
The Board continues to focus on improvements in Hayward Tyler's operations,
along with driving the performance of Booth, Metalcraft and Energy Steel. This
programme is progressing to plan. We are also focused on the opportunity to
transform the medical imaging division's performance, thanks to the merger of
Magnetica with Scientific Magnetics and Tecmag, as well as the more recent
investments in Adaptix. The objective for the Group is to become a leading
supplier in targeted energy and medical markets, of operation critical
products and services, with a reputation for high quality and delivery on-time
and on-budget. The Group has production facilities in its three key
geographical markets (the Americas, Asia and Europe) with lower cost
facilities in Asia, where appropriate and product development and realisation
in the UK, the USA and Australia. The Group will continue to invest in
breakthrough and disruptive technologies in the energy and medical markets.
Avingtrans' primary focus in Energy is the nuclear sector - harvesting
opportunities in decommissioning, life extension and next generation nuclear
markets. We are also engaged with a variety of other niches in the renewable
energy sector. The Directors will continue to build on our footprint in the
wider power and energy sectors.
Following the HTG acquisition in 2017, in order to maximise long term
shareholder value via our PIE model, we reorganised the Energy assets of the
Group into two distinct divisions, currently comprising:
• Engineered Pumps and Motors (EPM) consisting of Hayward Tyler's units in the
UK (in Luton and East Kilbride), USA (in Vermont and Michigan), China and
India.
• Process Solutions and Rotating Equipment (PSRE) consisting of Metalcraft,
Ormandy, Composite Products and Booth Industries.
In parallel, the focus of the Group's Medical Imaging division (MII) has fully
pivoted to becoming a market leader in the production of compact,
superconducting, cryogen-free MRI systems, targeted at specific applications
including orthopaedic imaging and veterinary imaging. Production of certain
existing products continues to support the division overall. Metalcraft has
completed a phased exit of third-party MRI component manufacturing. This
division now consists of Magnetica in Australia (the majority stake was
acquired in January 2021) which has been successfully integrated with
Scientific Magnetics, UK and Tecmag in the USA. Subsequently, we have sought
to further strengthen our medical imaging strategy, via investments in Adaptix
3D X-ray technology, in Oxford, UK.
Our businesses have the capability to engineer products in developed markets
and to produce those products partly, or wholly, in low-cost-countries, where
appropriate. This allows us and our customers to access low-cost sourcing at
minimum risk, as well as positioning us neatly in the development of the
Chinese, Indian and other Asian markets for our products. Hayward Tyler is
well established in China and India, providing integrated supply chain options
for our blue-chip customers.
A central strategic theme for Avingtrans is to proactively nurture and grow
the proportion of our business stemming from aftersales. In trojan horse
fashion, we are targeting both our own installed base and the wider
competitive installed bases of such equipment, in areas where we can offer an
advantage to our end-user customers. This focus now applies mainly to our
Energy businesses, with the Medical division having pivoted to new medical
imaging products and services.
Energy - Engineered Pumps and Motors ("EPM")
For Hayward Tyler ("HT"), the main priorities remain to strengthen the
aftermarket capabilities - so often the Achilles heel of engineering
businesses - and to maximise opportunities in the nuclear life extension
market. Whilst the division continues to suffer from supply chain disruptions,
EPM was nevertheless able to deliver a robust result in H1, with a strong
order book and prospects for the year ahead.
At HT Luton, aftermarket activities remain the focus, including the servicing
of third-party equipment. The £10m contract in Sweden with Vattenfall for the
Forsmark plant (for nuclear life extension) was completed in the period and
the cash was collected by period end. Further defence orders have been
received and are being executed on target.
Hydrocarbon related orders saw a significant bounce back as the UK North Sea
sector reopened for business. We are still doggedly progressing with the sale
of the Luton site, albeit that this process has, as previously noted, been
elongated by Covid-19 and the economic downturn.
The HT Fluid Handling business in Scotland has been a consistently good
performer since acquisition and has fitted well into our ambitions to build a
wider nuclear capability. The business has maintained a strong order book and
the bolt-on acquisition of Transkem (a specialist in industrial mixers) has
gone to plan.
HT Inc in Vermont (USA) again suffered from on-going supply chain disruptions,
but it was able to make good progress on the previously booked KHNP orders in
the period. The business continues to see solid order intake in the nuclear
life extension market in the USA. HT Inc's new R&D opportunities in next
generation nuclear power have made good progress, with further TerraPower
prototype products shipped in the period.
HT Kunshan (China) has been less affected by supply chain issues and has
developed a healthy order book, including an improving position in the
aftermarket business, with new orders coming from Chinese electricity
producers working on reducing the environmental impact of electricity
production.
In India, the local team delivered a solid H1 performance.
Energy Steel ('ES') in Michigan (USA), continues to steadily improve, with
some significant new orders confirmed in the period, notably from ITER. ES is
now well settled-in to its new building in Rochester Hills, having exited the
previous building at the end of FY21.
Energy - Process Solutions and Rotating Equipment ("PSRE")
PSRE is equally focused on the aftermarket where feasible, which has gradually
improved the margin mix. Following a jump in performance last year, PSRE was
also affected by supply chain disruptions in H1, resulting in a relatively
flat, if consistent performance outcome versus H1 of FY22, although the
division expects to see improvement in H2.
Metalcraft has made good progress with Phase 2 of the Sellafield 3M3
("three-cubic-metres") box contract, now worth £70m in total over the next
six years. The next follow-on 3M3 box contract tender, expected to be worth
over £900m, is now expected to be tendered in 2025 by Sellafield. At the
Chatteris site, construction of the new training centre was completed in the
period and the first intake of apprentices commenced on time. This is a
landmark building for the town and a boost for local apprenticeships, which
dovetails neatly with the Government's "levelling-up" agenda. Metalcraft in
China has wrapped-up its activities for Siemens on MRI component supply.
Ormandy's performance was again solid in the period and order intake remains
strong. Post period end, Ormandy acquired the assets of HEVAC and HES for
£852k. The plan is to integrate the majority of the HEVAC employees into the
Ormandy site, which is expected to produce cost savings and thus return HEVAC
to profit.
Booth Industries maintained a strong growth trajectory. Booth has a record
order book, including the £36m order for HS2 cross-tunnel doors. This project
reached a key milestone recently, with approval of the door design by HS2. The
new building extension in Bolton (Project Apollo) is fully operational and it
incorporates a range of energy saving measures, in contrast to the earlier,
more spartan facilities.
Finally, Composite Products had a relatively subdued first half, with some
supply chain issues and customer induced delays holding back results, although
the impact on the Group was not material.
Medical and Industrial Imaging ("MII")
Magnetica, Scientific Magnetics (SciMag) and Tecmag are working effectively
together to make good progress on our promethean development of compact,
superconducting, helium-free MRI systems entirely in-house. Magnetica remains
broadly on track to launch its first orthopaedic product later in calendar Q4
2023, as planned.
Our initial estimate of the addressable orthopaedic imaging market is circa
£400m p.a. (approximately 10% of the total MRI hardware and service market).
However, our intended "pay per scan" business model could mean that the
opportunity is significantly larger. It is more difficult to quantify other
potential market segments (e.g. veterinary imaging) at this stage because
equivalent, dedicated products do not exist. In the latest investment round,
which completed post period end, Avingtrans committed to increase its
investment in Magnetica, which will ultimately increase its shareholding to
c74% of the issued share capital. We believe that materially reducing the size
and total costs of these dedicated MRI systems, coupled with them being much
easier to set up in a variety of locations, as well as increasing the scan
rate by up to 300%, will produce a compelling sales proposition. In addition,
these dedicated systems could free-up capacity on the existing MRI system
installed base, which should be a major benefit to healthcare organisations.
SciMag and Tecmag will rebrand to Magnetica in due course, to present a
seamless image of the new entity. However, there is still merit in continuing
with various existing products and services at SciMag and Tecmag, so long as
they do not detract from our core vision for MRI, which holds out the prospect
of materially increasing the value of Magnetica over the coming years. Orders
for existing SciMag and Tecmag products held up well in the period.
In the half, Avingtrans made a further investment of £2.0m in Adaptix,
Oxford, UK, via a convertible loan note, on favourable terms. This brings the
total investment in Adaptix to £6m. Adaptix launched its compact 3D x-ray
system for orthopaedics in the USA late in 2022, to an encouraging market
response. Post-period end, Adaptix received its so called 510(k) approval to
sell the product in the USA, from the FDA. The strategies of Magnetica and
Adaptix are convergent, and we see potentially large benefits in combining
their approaches to market in technology, software and distribution channels
amongst others.
Markets - Energy
The global demand for energy experienced a hiatus during the pandemic but we
are seeing a consistent return to growth. According to a recent report by BP,
the effect of the pandemic and the Russia / Ukraine conflict may be to drive
the world faster towards increased efficiency and decarbonisation. This trend
could benefit our businesses in the nuclear and renewables sectors.
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. In the West, where facilities are being operated for longer
than their intended design lives, 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
As a result of the Russia / Ukraine conflict, global government attitudes to
nuclear power have risen, phoenix-like, from the ashes of previous perceived
energy security. Nevertheless, 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 currently in Asia, with the exception of
the limited UK and proposed French programmes. However, certain market
segments remain robust, 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, such as Small Modular Reactors (SMRs), or Advanced Generation IV
Reactors - eg with TerraPower, USA. In addition, these segments have a
consolidating supply chain and a lack 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. Energy Steel bolsters the
Group's capabilities in this regard.
The UK remains pre-eminent when it comes to decommissioning, 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 long 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 forward 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 include:
• 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
globally. Opportunities still exist in India, China, Southeast Asia, Eastern
Europe and the Middle East. EPM is putting products into new applications, eg
- scrubbers, to reduce emissions from power stations.
• 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 range of products that can be applied
directly to this market segment and has expertise that can be used to develop
new products for parts of this market, such as molten salt for concentrated
solar power applications.
Hydrocarbons
As oil demand has picked up following both the pandemic easing and then being
driven by the Russia / Ukraine conflict, so the oil price has followed - and
the Brent crude price is now trading in the range of $75 to $85 per barrel. As
a result, new capital expenditure in this sector has begun to recover but our
forecasts remain prudent, although we continue to see momentum building in
aftermarket orders.
Markets - Medical
The diagnostic imaging market is a large global sector, dominated by a few
large systems manufacturers. In 2022, the total Diagnostic Imaging Market was
estimated to be worth $32.3bn, according to Grand View Research and is
expected to continue to grow at almost 5% per annum until 2030. The largest
market is the USA, followed by Europe and Japan. The fastest growing markets
are China and India.
After the acquisition of a majority stake in Magnetica (AUS) in January 2021,
we merged Magnetica with Scientific Magnetics (UK) and Tecmag (US), to create
an innovative, niche-MRI systems supplier, which can address specific parts of
the market, not well served by dedicated products at present. This includes,
for example, orthopaedic and veterinary imaging. Although Magnetica is
primarily targeting the Magnetic Resonance Imaging (MRI) market, Nuclear
Magnetic Resonance (NMR) and magnets for physics continue to be of interest,
due to the similar requirements for spectrometers, superconducting magnets and
cryogenics. Market drivers for MRI include: an increased incidence of chronic
diseases; the rise in geriatric populations; growing awareness about early
benefits of diagnosis; and the introduction of advanced systems with superior
image quality.
According to ResearchAndMarkets, MRI itself is approximately 19% by value of
the total diagnostic Imaging market and is projected to grow at 5.0% p.a. In
the period, our initial investment in Adaptix allowed us access to the X-ray
segment of diagnostic imaging. X-ray itself represents circa 33% of the total
market. For both Magnetica and Adaptix, the portion of the X-ray and MRI
markets we believe we can access is over 20% of the total, representing a
potential addressable market of over $3bn.
End User/Aftermarket
The MRI market segment is dominated by a handful of manufacturers, including
titans like GE, Siemens, Philips and Canon, who account for circa 80% of
revenue globally. These players also dominate the aftermarket, although there
are a few independent MRI service businesses in existence. Magnetica and
Adaptix are not present in the MRI aftermarket at this time but both will
naturally service the aftermarket for their own products once these are
launched.
As noted above, the MRI market segment is dominated by a handful of global
manufacturers and we do not intend to compete with them directly, since
Magnetica and Adaptix are planning to create new niche markets for MRI and
X-ray. Following the pivot to niche full system supply, Avingtrans moved in
parallel to exit third-party MRI component supply and this process is now
complete, culminating with the sale of Metalcraft China, post period end. Our
first target is orthopaedic imaging, where encouraging development of
Magnetica's prototype system is on-going. The earliest commercial launch of
this product could be later in 2023, subject to regulatory approval in target
markets. Post period end, Adaptix received its 510(k) approval from the FDA
in the USA, for its 3D X-ray product - also targeted at orthopaedic imaging.
Security
High security and integrity doors became a new market for the Group, following
the acquisition of Booth Industries in 2019. Global safety and security
concerns, as well as risk mitigation on large infrastructure projects, are key
drivers for growth at Booth and we are cultivating these opportunities
carefully. Thus far, most of Booth's sales are still in the UK but the
business has begun to build up a prospect pipeline overseas. We also believe
that there is an aftermarket opportunity, which is now being developed.
Threat detection standards for baggage handling at airports and package
scanning have been tightened everywhere around the world - especially in
Europe and the USA. With many millions of bags and packages flowing across
border crossings every day, screening devices have to comply with threat
detection standards without impacting throughput. Rapiscan, the biggest
customer for Composite Products, is a market leader in this sector, whose
presence is increasing as new standards are rolled out.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators to monitor the
business, as set out below. The Company publishes more detailed and
operational KPIs in its annual report. The figures relate only to continuing
operations.
Revenue: increase year on year largely driven by additional OEM business in
EPM
Overall Group revenue increased by 12.3% to £50.0m (2022 H1: £44.5m). All
three divisions saw some improvement but the increase was mainly driven by
additional OEM business in the EPM division.
Gross margin ('GM') - a modest reduction
GM decreased to 32.6% (2022 H1: 33.9%), driven by increased OEM sales in the
mix.
Profit margin: EBITDA increase driven by increased revenue.
Adjusted EBITDA (note 4) increased by 11.4%, to £6.4m, on higher revenues
(2022 H1: £5.7m) mainly due to increased revenue and profit in the EPM
division, in turn driven by higher orders from nuclear life extension and
recovery in the North Sea sector.
Tax: future profits and cash protected by available losses
The effective rate of taxation at Group level was a 13.8% tax charge. A US tax
prior year adjustment kept the rate lower than expected and the use of brought
forward losses in the UK. The Group tax position will continue to be aided
in the coming years by the utilisation of historic losses available in the UK
and US.
Adjusted Earnings per Share (EPS): modest improvement.
Adjusted diluted earnings per share from continuing operations was up at 10.8p
(2022 H1:10.2p).
Basic and diluted earnings per share from continuing operations reduced to
7.8p (2022 H1: 9.0p) and to 7.6p (2022 H1: 8.7p).
Funding and Liquidity: net cash position remains robust.
Net cash increased to £17.3m, excluding IFRS16 debt (31 May 2022: £16.7m),
despite the further investments in Magnetica and Adaptix and in additional
working capital, used to mitigate on-going supply chain disruption risks. Cash
inflow from operating activities in the period was £4.1m (2022 H1: £4.0m)
Dividend: interim dividend progressively increased.
The Board is continuing with its policy of gradual increases in dividends. The
dividend is 1.7 pence per share (2022 H1: 1.6 pence). The dividend will be
paid on 16 June 2023, to shareholders on the register as at 12 May 2023.
ESG (Environmental, Social, and Governance)
Avingtrans is endeavouring to attain a high level of clarity on ESG matters.
We will be reporting on this herculean task once more in our next Annual
Report. However, we comment on some ESG related matters below, to keep our
investors informed.
People
There were no personnel changes at Board or divisional management level.
Despite a currently tight labour market in the UK and the USA, we continue to
strengthen the management teams in the divisions, with further appointments
being made in the period and with an emphasis on aftermarket opportunities,
where applicable. Skills availability is always challenging, especially so
this year but we do not expect to be materially disadvantaged in the market.
We continue to invest significant effort in developing skills and talent, both
through structured apprenticeship programmes and graduate development plans,
across a number of business units. The construction of the apprentice training
school based at Metalcraft was completed and we have partnered with West
Suffolk College (WSC) to be the operator and training provider at the centre.
The first apprentices have now commenced their courses in the new building.
The Group continues to be recognised nationally for the strength of its
apprenticeship training schemes.
Sustainability
We have developed a robust governance structure which supports proactive and
collaborative working aimed at addressing Environmental, Social and Governance
(ESG) risks and opportunities across the Group.
Our approach to sustainability is aligned with the UN's Sustainable
Development Goals (SDGs) and our priorities are:
• Health, safety, and wellbeing
• Operational eco-efficiency
• Development of cleaner technologies
Health, safety and wellbeing
As regular acquirers, we find varying levels of capability and knowledge
across different businesses. A frequent investment need in smaller
acquisitions is to spread HSE best practice from other Group businesses and
bring local processes up to the required standards. Larger acquisitions (eg
HTG previously) generally 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 and reviews
with local management, as appropriate and the Board takes an active interest
in progress, during site visits around board meetings.
Operational eco-efficiency
We are very pleased with the reduction in carbon intensity which the UK sites
achieved in FY22, with tCO2e £m of revenue falling from 40.2 to 36.8. We are
looking to build on this success in FY23, with further replacement of lighting
with LEDs, local sourcing of materials, and transport emission reduction
strategies.
We continue to develop appropriate metrics and targets for the Group. A
significant part of our operating activities in the Medical and Industrial
Imaging division is the development of new products and technologies, which do
not currently generate revenues. Consequently, we are looking at moving to a
tCO2e per employee or labour hour model for FY23.
Development of cleaner technologies
Our Hayward Tyler business continues to have success winning work for new
nuclear projects, securing a contract extension during the period relating to
the US Department of Energy's Advanced Reactor Demonstration Program. For this
program Hayward Tyler are developing high-temperature molten salt pumps
destined for a state-of-the-art Integrated Effects Test facility, under
development by Southern Company and TerraPower to advance development of the
Molten Chloride Fast Reactor.
Magnetica's helium-free, compact MRI product development is proceeding to
plan, with an expected launch of the orthopaedic product in Q4 2023. Helium is
a scarce, non-renewable resource, mostly obtained as a by-product of oil
extraction.
Social Responsibility
The Group maintains the highest ethical and professional standards across all
of its activities and social responsibility is 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
supports 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.
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. Avingtrans
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 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
refreshed in all areas of the business, to ensure that the Act is complied
with.
Outlook
The Group continues to invest across its three divisions, with a focus on the
global energy and medical markets, to position them for maximum shareholder
value, via exits in the years to come. Magnetica is making good progress on
the development of compact MRI systems, reinforced by the strategic
collaboration with Adaptix in 3D X-ray. We continue to see improvements in
other business units - eg at Booth and Energy Steel, as demonstrated by the
first half results. Our value creation targets continue to be accomplished as
planned and are underpinned by a conservative approach to debt, which is
important during on-going economic challenges.
The energy divisions have a strong emphasis on the nuclear power, thermal and
hydrocarbon markets and the associated aftermarkets. The medical division has
successfully pivoted to focus on novel compact MRI systems and associated 3D
X-ray systems for niche applications. 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,
where appropriate, to capitalise on the continued customer demand for
efficient, reliable and safe facilities.
The on-going disruption to supply chains remains our biggest uncertainty,
though we believe that we have perhaps now passed "peak disruption".
Inflationary pressures are continuing to have an impact on our businesses, but
we remain broadly able to mitigate these risks, to maintain stable margins,
though not without considerable effort.
Our markets are continuously evolving and strategic M&A opportunities
remain a priority for us. We remain particularly interested in turnaround
opportunities and in longer term buy and build scenarios. Businesses like ours
can command high valuations at the point of exit. Whilst the Board remains
vigilant, we are confident about the current direction and potential future
opportunities across our markets. We will continue to refine our strategy by
pinpointing specific additional acquisitions, as the opportunities arise, to
build businesses which can create sustainable shareholder value, whilst
maintaining a prudent level of financial headroom, to mitigate any unforeseen
risks. After the performance in the first half coupled with the strength in
our order book, the Group is well placed to achieve market expectations for
the full year.
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
21 February 2023 21 February 2023 21 February 2023
Consolidated Income Statement (Unaudited)
for the six months ended 30 November 2022
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Revenue 50,010 44,541 99,075
Cost of sales (33,714) (29,434) (65,241)
Gross profit 16,296 15,107 33,834
Distribution costs (2,319) (1,566) (3,630)
Other administrative expenses (10,390) (10,369) (23,019)
Operating profit before amortisation of acquired intangibles, other
non-underlying items and exceptional items
4,203 3,744 8,494
Amortisation of intangibles from business combinations
(583) (404) (869)
Other non-underlying items (2) (76) (318)
Acquisition costs - - (29)
Restructuring costs (31) (92) (93)
Operating profit 3,587 3,172 7,185
Finance income (Note 5) 2 145 176
Finance costs (Note 5) (291) (134) (386)
Profit before taxation 3,298 3,183 6,975
Taxation (Note 3) (454) (252) (971)
Profit after taxation from continuing operations 2,844 2,931 6,004
(Loss)/profit after taxation from discontinuing operations (327) (64) 57
Profit for the financial period 2,517 2,867 6,061
Profit is attributable to:
Owners of Avingtrans PLC 2,660 3,111 6,478
Non-controlling interest (143) (244) (417)
Total 2,517 2,867 6,061
Profit per share:
From continuing operations
- Basic (Note 6) 8.8p 9.2p 18.7p
- Diluted (Note 6) 8.6p 8.9p 18.1p
From continuing and discontinuing operations
- Basic (Note 6) 7.8p 9.0p 18.9p
- Diluted (Note 6) 7.6p 8.7p 18.3p
Consolidated statement of comprehensive income (Unaudited)
for the six months ended 30 November 2022
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Profit for the period 2,517 2,867 6,061
Items that will not be subsequently be reclassified to profit or loss
Remeasurement of net defined benefit liability - - 95
Income tax relating to items not reclassified - - (24)
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations 514 631 1,445
Total comprehensive profit for the period 3,031 3,498 7,577
Summarised consolidated balance sheet (Unaudited)
at 30 November 2022
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Non current assets
Goodwill 21,420 21,233 21,420
Other intangible assets 16,224 14,547 15,675
Property, plant and equipment 23,195 25,013 25,239
Investments 4,000 2,500 4,000
Deferred tax asset 1,756 1,757 1,544
Pension and other employee obligations 1,829 1,425 1,688
68,424 66,475 69,566
Current assets
Inventories 13,945 11,756 11,759
Trade and other receivables: falling due within one year 49,213 38,293 46,817
Trade and other receivables: falling due after one year 1,518 1,650 1,579
Current tax asset 285 598 686
Assets held for sale 1,614 - -
Cash and cash equivalents 22,007 29,304 24,287
88,583 81,601 85,128
Total assets 157,007 148,076 154,694
Current liabilities
Trade and other payables (32,496) (28,511) (29,629)
Lease liabilities (1,083) (1,020) (1,605)
Borrowings (2,676) (4,799) (5,497)
Current tax liabilities (941) (309) (710)
Provisions (1,659) (1,711) (1,770)
Derivatives (10) (6) -
Liabilities associated with assets held for sale (218) - -
Total current liabilities (39,082) (36,356) (39,211)
Non-current liabilities
Borrowings (674) (839) (762)
Lease liabilities (3,069) (2,691) (3,097)
Deferred tax (4,458) (4,094) (4,465)
Other creditors (1,268) (1,235) (1,342)
Total non-current liabilities (9,469) (8,859) (9,666)
Total liabilities (48,551) (45,215) (48,877)
Net assets 108,455 102,861 105,817
Equity
Share capital 1,607 1,607 1,607
Share premium account 15,693 15,663 15,693
Capital redemption reserve 1,299 1,299 1,299
Translation reserve 1,368 (73) 825
Merger reserve 28,949 28,949 28,949
Other reserves 1,457 1,457 1,457
Investment in own shares (4,235) (4,235) (4,235)
Retained earnings 60,490 56,332 58,223
Total equity attributable to equity holders of the parent 106,628 100,999 103,818
Non-controlling interest 1,827 1,862 1,999
Total equity 108,455 102,861 105,817
Consolidated statement of changes in equity (Unaudited)
at 30 November 2022
Share Share Capital Merger Trans- Other Invest-ment in own shares Retained earning Total
capital premium redemp- reserve lation reserves Attributable owners of the Group
account tion reserve Non-controlling interest
reserve Total
Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 June 2021 1,599 15,347 1,299 28,949 (732) 1458 (4,235) 53,614 97,298 1,665 98,963
Ordinary shares issued 8 316 - - - - - - 324 - 324
Share-based payments - - - - - - - 76 76 - 76
Total transactions with owners 8 316 - - - - - 76 400 400
-
Profit for the period - - - - - - - 3,111 3,111 (244) 2,867
Investment in subsidiary with non-controlling interest - - - - 28 - - (469) (441) 441 -
Other comprehensive income
Exchange rate gain - - - - 631 - - - 631 - 631
Total comprehensive income for the period - - - - 659 - - 2,642 3,301 197 3,498
Balance at 1,607 15,663 1,299 28,949 (73) 1,458 (4,235) 56,332 100,999 1,862 102,861
30 Nov 2021
At 1 Dec 2021 1,607 15,663 1,299 28,949 (73) 1,458 (4,235) 56,332 100,999 1,862 102,861
Ordinary shares issued 30 - - - - - - 30 - 30
Dividends paid - - - - - - - (1,265) (1,265) - (1,265)
Share-based payments - - - - - - - 112 112 - 112
Total transactions with owners - 30 - - - - - (1,153) (1,123) - (1,123)
Profit for the period - - - - - - - 3,367 3,367 (173) 3,194
Investment in subsidiary with non-controlling interest - - - - 84 - - (394) (310) 310 -
Other comprehensive income
Actuarial gain for the period on pension scheme - - - - - - - 95 95 - 95
Deferred tax on actuarial movement on pension scheme - - - - - - - (24) (24) - (24)
Exchange gain - - - - 814 - - - 814 - 814
Total comprehensive income for the period - - - - 898 - - 3,044 3,942 137 4,079
Balance at 1,607 15,693 1,299 28,949 825 1,458 (4,235) 58,223 103,818 1,999 105,817
31 May 2022
At 1 June 2022 1,607 15,693 1,299 28,949 825 1,458 (4,235) 58,223 103,818 1,999 105,817
Ordinary shares issued - - - - - - - - - - -
Dividends paid - - - - - - - (507) (507) - (507)
Share-based payments - - - - - - - 114 114 - 114
Total transactions with owners - - - - - - - (393) (393) (393)
-
Profit for the period - - - - - - - 2,660 2,660 (143) 2,517
Investment in subsidiary with non-controlling interest - - - - 29 - - - 29 (29) -
Other comprehensive income
Exchange rate gain - - - - 514 - - - 514 - 514
Total comprehensive income for the period - - - - 543 - - 2,660 3,204 (172) 3,031
Balance at 1,607 15,693 1,299 28,949 1,368 1,458 (4,235) 60,490 106,628 1,827 108,455
30 Nov 2022
Consolidated cash flow statement (Unaudited)
for the six months ended 30 November 2022
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Operating activities
Cash flows from operating activities 4,639 4,499 4,173
Finance costs paid (301) (193) (388)
Income tax (paid)/repaid (78) (140) 203
Contributions to defined benefit plan (141) (141) (282)
Net cash inflow from operating activities 4,119 4,025 3,706
Investing activities
Purchase of unlisted investments - (2,500) (4,000)
Acquisition of subsidiary undertakings - - (582)
Finance income 2 - 176
Purchase of intangible assets (1,358) (800) (1,996)
Purchase of property, plant and equipment (722) (1,220) (2,989)
Net cash used by investing activities (2,077) (4,520) (9,347)
Financing activities
Equity dividends paid (507) - (1,265)
Repayments of bank loans (3,047) (148) (468)
Repayments of leases (707) (682) (1,486)
Proceeds from issue of ordinary shares - 324 355
Borrowings raised - 125 2,493
Net cash outflow from financing activities (4,261) (381) (371)
Net decrease in cash and cash equivalents (2,220) (876) (6,012)
Cash and cash equivalents at beginning of period 23,902 29,736 29,736
Effect of foreign exchange rate changes (61) 77 178
Cash and cash equivalents at end of period 21,622 28,937 23,902
Cashflows from operating activities (Unaudited)
for the six months ended 30 November 2022
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Profit before income tax from continuing operations 3,299 3,183 6,975
(Loss)/profit before income tax from discontinuing operations (327) (64) 57
Adjustments for:
Depreciation of property, plant and equipment 2,023 1,844 3,675
Amortisation of intangible assets 117 277 374
Amortisation of intangibles from business combinations 583 404 869
Loss on disposal of property, plant and equipment 10 61 44
Finance income (2) (145) (176)
Finance expense 291 137 393
Share based payment charge 114 76 188
Changes in working capital
(Increase)/decrease in inventories (2,363) (979) (1,033)
(Increase)/decrease in trade and other receivables (2,673) 2,756 (7,837)
Increase/(decrease) in trade and other payables 3,719 (2,956) 783
(Decrease)/increase in provisions (139) (101) 32
Other non-cash changes (10) 6 (171)
Cash inflow from operating activities 4,639 4,499 4,173
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Cash and cash equivalents
Cash 22,007 29,304 24,287
Overdrafts (385) (367) (385)
21,622 28,937 23,902
Notes to the half year statement
30 November 2022
1. Basis of preparation
The Group's interim results for the six-month period ended 30 November 2022
are prepared in accordance with the Group's accounting policies which are
based on the recognition and measurement principles of International Financial
Reporting Standards ('IFRS') as adopted by the EU and effective, or expected
to be adopted and effective, at 31 May 2023. As permitted, this interim report
has been prepared in accordance with the AIM rules and not in accordance with
IAS34 'Interim financial reporting'.
These interim results do not constitute full statutory accounts within the
meaning of section 434 of the Companies Act 2006 and are unaudited. The
unaudited interim financial statements were approved by the Board of Directors
on 21 February 2023 and will shortly be available on the Group's website at
www.avingtrans.plc.uk.
The consolidated financial statements are prepared under the historical cost
convention as modified to include the revaluation of financial instruments.
The accounting policies used in the interim financial statements are
consistent with IFRS and those which will be adopted in the preparation of the
Group's annual report and financial statements for the year ended 31 May 2023.
The statutory accounts for the year ended 31 May 2022, which were prepared
under IFRS, have been filed with the Registrar of Companies. These statutory
accounts carried an unqualified Auditor's Report and did not contain a
statement under either Section 498(2) or (3) of the Companies Act 2006.
2. Segmental analysis
Energy Energy Medical Unallocated central items Total
EPM PSRE MII
£'000 £'000 £'000 £'000 £'000
6 months to 30 November 2022
Original equipment 9,080 20,809 1,498 - 31,388
Aftermarket 17,341 1,280 2 - 18,623
Revenue 26,421 22,089 1,500 - 50,010
Operating profit/(loss) 1,949 2,531 (310) (582) 3,588
Net finance costs (289)
Taxation (454)
Profit after tax from continuing operations 2,844
Energy Energy Medical Unallocated central items Total
EPM PSRE MII
£'000 £'000 £'000 £'000 £'000
Year ended 31 May 2022
Original equipment 14,089 40,408 2,426 - 56,922
Aftermarket 39,115 3,006 31 - 42,153
Revenue 53,204 43,414 2,457 - 99,075
Operating profit/(loss) 4,592 4,956 (1,291) (1,072) 7,185
Net finance costs (210)
Taxation (971)
Profit after tax from continuing operations 6,004
Energy Energy Medical Unallocated central items Total
EPM PSRE MII
£'000 £'000 £'000 £'000 £'000
6 months to 30 November 2021
Original equipment 6,131 19,741 813 - 26,685
Aftermarket 16,486 1,369 - - 17,856
Revenue 22,618 21,110 813 - 44,540
Operating profit/(loss) 1,435 2,764 (524) (504) 3,171
Net finance costs 11
Taxation (252)
Profit after tax from continuing operations 2,931
3. Taxation
The taxation charge is based upon the expected effective rate for the year
ended 31 May 2023.
4. Adjusted Earnings before interest, tax, depreciation and amortisation
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Profit before tax from continuing operations 3,298 3,183 6,975
Share based payment expense 114 76 188
Acquisition costs - - 29
Restructuring costs 31 92 93
Other exceptionals 2 - 130
Gain /(loss) on derivatives 9 (139) (144)
Amortisation of intangibles from business combinations 583 404 869
Adjusted profit before tax 4,037 3,616 8,140
Finance income (2) (145) (176)
Finance cost 291 134 386
(Loss)/gain on derivatives (9) 139 144
Adjusted profit before interest, tax and amortisation from business
combinations ('EBITA')
4,317 3,744 8,494
Depreciation 1,906 1,724 3,433
Amortisation of other intangible assets 117 222 374
Amortisation of contract assets 61 55 132
Adjusted Earnings before interest, tax, depreciation and amortisation
('EBITDA')
6,401 5,744 12,432
5. Finance income and costs
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2022 2021 2022
£'000 £'000 £'000
Finance income
Bank balances and deposits 2 6 4
Gain on the fair value of derivative contracts - 139 144
Interest from other - - 28
2 145 176
Finance costs
Interest on banking facilities and lease liabilities 282 134 386
Loss on the fair value of derivative contracts 9 - -
291 134 386
6. Earnings per share
Basic earnings per share is based on the earnings 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.
6 months to 6 months to Year to
30 Nov 2022 30 Nov 2021 31 May 2022
No No No
Weighted average number of shares - basic 32,141,445 31,995,372 32,070,325
Share Option adjustment 939,646 1,031,656 1,063,674
Weighted average number of shares - diluted 33,081,091 33,027,028 33,133,999
£'000 £'000 £'000
Earnings from continuing operations 2,844 2,931 6,004
Share based payments 114 76 188
Acquisition costs - - 29
Restructuring costs 31 92 93
Other exceptionals 2 - 130
Loss/(gain) on derivatives 9 (139) (144)
Amortisation of intangibles from business combinations 583 404 868
Adjusted earnings from continuing operations 3,583 3,364 7,168
From continuing operations:
Basic earnings per share 8.8p 9.2p 18.7p
Adjusted basic earnings per share 11.1p 10.5p 22.4p
Diluted earnings per share 8.6p 8.9p 18.1p
Adjusted diluted earnings per share 10.8p 10.2p 21.6p
Earnings from discontinuing operations (327) (64) 57
From discontinuing operations:
Basic (loss)/gain per share (1.0)p (0.2)p 0.2p
Adjusted basic (loss)/gain per share (1.0)p (0.2)p 0.2p
Diluted (loss)/gain per share (1.0)p (0.2)p 0.2p
Adjusted diluted (loss)/gain per share (1.0)p (0.2)p 0.2p
Earnings attributable to shareholders including non-controlling interest
3,256 3,300 7,225
Basic earnings per share 7.8p 9.0p 18.9p
Adjusted basic earnings per share 10.1p 10.3p 22.5p
Diluted earnings per share 7.6p 8.7p 18.3p
Adjusted diluted earnings per share 9.8p 10.0p 21.8p
The Directors believe that the above adjusted earnings per share calculation
from continuing operations is the most appropriate reflection of the Group
performance.
7. Net cash/(debt) and gearing
The gearing ratio at the year-end is as follows: 30 Nov 2022 30 Nov 2021 31 May 2022
£'000 £'000 £'000
Cash 22,007 29,304 24,287
Loans (2,965) (5,271) (5,874)
Lease liability - finance leases under IAS17 (1,406) (968) (1,313)
Lease liability - under IFRS 16 (2,746) (2,743) (3,389)
Overdrafts (385) (367) (385)
Net cash 14,505 19,955 13,326
Equity 108,455 102,861 105,817
Net cash/(debt) to equity ratio 13.4% 19.4% 12.6%
Net cash/(debt) to equity ratio excluding IFRS16 debt 15.9% 22.1% 23.6%
8. Events after the balance sheet date
On 1 December, the Group invested £2.0m in Adaptix Limited, in the form of a
convertible loan note.
On 30 December 2022, Maloney Metalcraft (Ormandy) acquired the assets of local
competitors, HEVAC and HES.
The Group is continuing to negotiate the sale of the Metalcraft China assets
following the exit from MRI component supply.
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