REG - Avingtrans PLC - Interim Results
28/02/2024 07:00
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RNS Number : 6838E Avingtrans PLC 28 February 2024
28 February 2024
Avingtrans Plc
("Avingtrans", the "Company", or the "Group")
Interim results for the six months ended 30 November 2023
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 2023.
Financial Highlights
· Group Revenue increased by 30.4% to £65.2m (2023 H1: £50.0m) in
line with management expectations.
· Gross Margin reduced slightly to 31.6% (2023 H1: 32.6%) as a
result of OEM versus aftermarket mix.
· Adj.*EBITDA increased by 14.1% to £7.3m, as a result of higher
revenues (2023 H1: £6.4m).
· Adj.*EBITDA margin reduced to 11.2% (2023 H1: 12.8%), mainly due
to higher OEM sales, and increased investment in the Medical division.
· Adj. Profit before tax £4.4m (2023 H1: £4.0m).
· Adj. Diluted Earnings Per Share from continuing operations
increased to 11.7p (2023 H1: 9.8p).
· Cash outflow from operating activities of £3.6m (2023 H1: inflow
£4.1m).
· Net debt (excl IFRS16 debt) at 30 November 2023 of £2.2m, (31
May 2023: £13.0m net cash) driven by:
o the investment in Slack & Parr ("S&P");
o acquisition of remaining 82% of Adaptix;
o ongoing investment in Magnetica; and
o a working capital outflow due to the timing of milestones of certain
contracts and on-going supply chain disruption.
· Interim Dividend of 1.8 pence per share (2023 H1: 1.7 pence).
*Adjusted to add back amortisation of intangibles from business combinations,
acquisition costs and exceptional items and discontinued operations.
Operational Highlights
Advanced Engineering Systems Division
· Revenue increased by 31.3% to £63.7m, with continuing robust
order cover.
· EBITDA increased by 20.0% to £8.5m (2023 H1: £7.1m), driven by
increased revenue
· Post period end, EPM and PSRE merged, to form new AES division,
led by Austen Adams.
· Acquisition of the assets of S&P in August 2023 for £4.1m,
including plant lease debt absorbed.
· Successful full integration of HES/Hevac into Ormandy Bradford.
· Two new nuclear decommissioning contracts for Metalcraft worth
£14.5m combined.
· HT Luton wins £2.5m defence contracts from Rolls Royce and a
further £3.0m from Forsmark.
· HT Inc wins $10.0m contract from TerraPower for next gen nuclear
power station.
Medical and Industrial Imaging Division
· Revenue steady year on year at £1.5m, pending the volume
build-up of new MRI and X-ray products.
· LBITDA increased to (£0.6m), vs 2023 H1: (£0.2m) as MRI and
X-ray development projects gathered pace
· Acquisition of Adaptix for a total of £7.2m, including absorbed
and repaid debts.
· Magnetica appointed first US distributor, Televere Systems.
· Adaptix also appointed Televere as first US distributor, post
period end.
· Positive launch at RSNA imaging conference - demonstrating market
demand for both products.
· Adaptix equipping Scottish facility to manufacture key system
components for Vet and Ortho products.
· Magnetica expanded into a bigger factory, to facilitate volume
MRI system production, starting in FY25.
· Tecmag moved into improved premises, to gear up for Magnetica and
Adaptix product sales in the USA.
· Adaptix commenced sales of Vet products in the UK and USA.
Volumes expected to increase in next FY.
Commenting on the results, Roger McDowell, Chairman, said:
"Despite some continuing supply chain instability and inflationary pressures,
our tried-and-tested Pinpoint-Invest-Exit ("PIE") approach produced strong
results during the period, as evidenced by increased revenue and stable gross
margins, resulting in a double-digit percentage growth in adjusted EBITDA.
"The Group has restructured itself, with the mature engineering business now
all in one Advanced Engineering Systems (AES) division. We continue to invest
in AES and also in the Medical and Industrial Imaging (MII) division. We are
now deliberately structured for future exits that should maximise shareholder
value. The marketing of the 3D X-ray systems at Adaptix and the development of
MRI system at Magnetica are proceeding to plan, to hit key milestones in 2024.
The first half results again demonstrate that we are proactively managing
continuing progress in the AES division. Our value creation goals are on
track, supported by a conservative approach to debt, which the Board deem to
be prudent at this time..
"Our markets are always changing and Avingtrans continues to prioritise taking
advantage of selected M&A opportunities, with the shrewd acquisitions of
the assets of Slack and Parr and Adaptix in the first half, the latter greatly
contributing to our exciting Medical division. We believe that the MII
business will command a substantial valuation in due course. We remain
optimistic about our prospects and the potential future opportunities across
our markets.
We have solid visibility over H2 FY24 revenue and profits, thanks to a
strong order intake and timely contract revenue recognition. Additionally,
there are no destocking issues, since Group products are "make to order".
Thus, the Board continues to be confident about our expectations for the
full year and views the future positively."
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.
Slack and Parr, Kegworth, UK
Focused on the design, manufacture and servicing of advanced precision gear
metering pumps, industrial dosing pumps and hydraulics flow divider solutions.
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.
Adaptix Ltd, Oxford & Edinburgh, UK
Designs and manufactures novel 3D X-ray systems, with imaging from a
stationary source, at a significantly lower dose than CT. Markets include
orthopaedics, veterinary and non-destructive evaluation.
Chairman's Statement
Despite some ongoing supply chain difficulties caused by various geopolitical
events, we are happy to report another strong first half performance by
Avingtrans. An improved EBITDA result has once again complemented a robust
revenue performance compared to H1 FY23, primarily as a result of higher
revenue and profit in the AES division. However, due to a higher level of OEM
sales in the mix, the gross margin decreased slightly year on year. Even after
the previously communicated significant additional investments in Magnetica
and Adaptix and cash being utilised on acquiring Adaptix and the assets of
Slack and Parr, our net debt position remains modest.
Both divisions' order cover for the remainder of FY24 remain strong and
important new orders were booked in the period, including £14.5m of
additional nuclear decommissioning orders for Metalcraft and a new design and
development $10m order from TerraPower, for Hayward Tyler in the USA. In
addition, there are no "destocking" issues for the Group, since our products
are "make to order".
Our well-established Pinpoint-Invest-Exit ("PIE") model continues to yield
positive outcomes, with ongoing improvement observed at Booth in particular.
Advancements in our medical imaging strategy are evident as the Magnetica
teams make significant progress in designing and building our proprietary
compact MRI product for the orthopaedics market. Our overall stake in
Magnetica is over 74%. Additionally, we completed the acquisition of the
remaining 82% of Adaptix for an additional consideration of £7.2m (including
absorbed and repaid debts). Its 3D X-ray systems are now being actively
marketed, focused on the UK and the USA, in the orthopaedics, veterinary and
non-destructive evaluation arenas. In the period, we also bought the assets of
specialist pumps manufacture, Slack and Parr (S&P), out of administration,
for £4.1m (including assumed plant lease debt. It is early in the recovery
cycle, but the signs are positive for S&P so far. Investors will recall
that Ormandy acquired the assets of local competitors HEVAC and HES for
£852k, in early 2023. This has been successful, with Ormandy reporting
significant results improvement, year on year.
Notwithstanding some supply chain disruptions still affecting the Group, our
divisional management teams have demonstrated resilience in addressing these
challenges. Signs of relief from this issue are gradually emerging. Positive
progress continues in our aftermarket plans for AES, where we aim to
outperform competitors by securing a larger share of the installed base
service and support business, both for our products and third-party offerings.
Enhanced end-user access provides a reliable and repeatable pipeline,
contributing to increased profitability. We remain focused on maximising
revenue opportunities arising from aftermarket access, both from our own
businesses and through strategic partnership deals.
The AES division experienced a robust first-half, with revenue up by 31.3%
year-on-year. Divisional margins decreased slightly, despite improving
performances at Booth and Ormandy, due to the increased OEM sales. The
Sellafield 3M3 box contract continues to progress in the second phase at
Metalcraft, with a steady monthly delivery of boxes. Hayward Tyler (HT)
continues to enjoy strong aftermarket sales, notably in the USA and in China.
Although the Luton site sale process faced obstacles due to the pandemic and
current economic challenges, active negotiations are ongoing.
In the Medical division, Magnetica continues steady progress in developing its
compact MRI system, a prototype of which we were able to exhibit in the
period. Magnetica expects to receive FDA 510(k) approval for its product early
in FY25. Also, during the period, we completed the acquisition of Adaptix and
we have begun to build up the necessary channels to market for their novel 3D
x-ray systems, as well as equipping its Scottish facility for volume
production.
Following this solid performance, the Board is announcing an increase of c6%
in the interim dividend to 1.8 pence per share, reflecting our commitment to
delivering long-term shareholder returns. This decision is underpinned by our
positive outlook on Group prospects and supported by a prudent fiscal
position.
In conclusion, the Board and I express our gratitude to all Avingtrans
employees for their determination and resilience during another challenging
period. We approach the future with cautious optimism and enthusiasm for the
times ahead.
Roger McDowell
Chairman
27 February 2024
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 safe and effective.
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 Advanced
Engineering Systems division forms the bulk of Avingtrans' operations.
Effective longer-term development of the Group's nascent Medical and
Industrial Imaging division is also a core focus for management, to create
further 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, Infrastructure and Medical sectors. Over the longer
term, our acquisition strategy has enabled our businesses to develop the
critical mass necessary to achieve leading positions 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 and 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, Ormandy and Metalcraft. This
programme is progressing to plan. We are also focused on the opportunity to
transform the medical imaging division's performance, via novel MRI products
at Magnetica, as well as the more recent acquisition of Adaptix with its novel
X-ray systems. The objective for the Group is to become a leading supplier in
targeted energy, infrastructure 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 regions (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 its chosen 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 management will continue to build on our footprint in the
wider power and energy sectors.
In order to maximise long term shareholder value via our PIE model, we
reorganised the engineering businesses of the Group under a single division:
Advanced Engineering Systems (AES) comprising of:
· Hayward Tyler's units in the UK (in Luton and East Kilbride), USA
(in Vermont and Michigan), China and India.
· Metalcraft, Ormandy, Composite Products, Booth Industries and the
recently acquired Slack and Parr assets.
In parallel, the focus of the Group's Medical Imaging division (MII) is to
become 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. 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. More recently, we have sought to further strengthen our
medical imaging strategy, via the acquisition of Adaptix, in Oxford, UK, which
specialises in 3D X-ray technology, with the main target markets being
orthopaedic and veterinary imaging.
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 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. 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 AES division, with the Medical division
having pivoted to novel medical imaging products and services.
Energy and Infrastructure - Advanced Engineering Systems ("AES")
For Hayward Tyler ("HT"), the main priorities remain to strengthen its
aftermarket capabilities and to maximise opportunities in the nuclear life
extension market. HT was 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. A follow on £3m contract in Sweden with Vattenfall
for the Forsmark plant (for nuclear life extension) commenced in the period.
Further defence orders have also been received from Rolls Royce and are being
executed as planned.
Hydrocarbon related orders from the UK North Sea sector remained robust. We
are still steadfastly progressing with the sale of the Luton site, albeit that
this process has, as previously noted, been elongated, first by Covid-19 and
now by macroeconomic disruption.
The HT Fluid Handling business in Scotland has been a consistently good
performer and has fitted well into our ambitions to build a wider nuclear
capability. The business has maintained a strong order book and the Transkem
industrial mixers business has again contributed positively.
HT Inc in Vermont (USA) 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 a further $10m design
and development TerraPower contract booked in the period.
HT Kunshan (China) 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 again delivered a solid H1 performance.
Energy Steel ('ES') in Michigan (USA) has sustained its positive momentum,
with a good H1 order intake, albeit that some key orders slipped into H2.
Metalcraft has made good progress with Phase 2 of the Sellafield 3M3
("three-cubic-metres") box contract and confirmed additional nuclear
decommissioning orders of over £14m in the period, including the first
contract from Magnox. The next follow-on 3M3 box contract tender, expected to
be worth over £900m, is expected to be tendered in 2025 by Sellafield. The
new apprentice training centre continues to build momentum.
Ormandy's performance improved year on year and order intake remains strong.
The acquisition of HEVAC and HES at the start of 2023 has been central to the
performance improvement.
Booth Industries maintained its strong growth trajectory. Booth has a record
order book, including the £36m order for HS2 cross-tunnel doors, which was
not affected by the recent HS2 phase 2 cancellation. The business is close to
completing the giant proscenium doors for "The Factory" building in
Manchester.
Composite Products had a reasonably good first half, boosted by new orders
from Rapiscan.
Recently acquired Slack and Parr is showing early positive signs of recovery,
as it begins its journey within the Group.
Medical and Industrial Imaging ("MII")
Magnetica, Scientific Magnetics (SciMag) and Tecmag are working effectively
together to make good progress on our exciting development of compact,
superconducting, helium-free MRI systems entirely in-house. Magnetica was able
to exhibit its prototype system in the period and the FDA 510(k) approval is
anticipated in early FY25. The business also appointed its first US
distributor, Televere Systems, in the period.
Our initial estimate of the addressable orthopaedic imaging market is circa £1.7bn p.a. (by 2030). This is assuming a capital sale model. Our intended longer term "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. Avingtrans has increased its investment in Magnetica, bringing its shareholding to over 74% 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, ratified by interest from Key Opinion Leaders at the prestigious Radiological Society of North America conference, in Chicago. 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 in due course, to present a seamless image for the business. 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 were solid in the period.
In H1, Avingtrans acquired the remaining 82% of the share capital of Adaptix, Oxford, UK for £2.5m in Avingtrans shares. We also adopted (or settled) various debts, amounting to a further £4.7m. Adaptix launched its compact 3D x-ray system for orthopaedics in the USA, following receipt of its 510(k) approval by the FDA. Adaptix has also launched its veterinary version of the 3D x-ray product and initial orders for a non-destructive evaluation product were also booked in the period. We estimate that the Total Addressable Market value of these three segments is $6.8bn pa.
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
Although worldwide energy demand witnessed a pause amid the pandemic, there
has been a steady resurgence in growth in recent times. The Russia/Ukraine
conflict has caused energy security concerns in many countries, which may
accelerate the global shift towards enhanced efficiency and decarbonisation.
This trajectory holds the potential to positively impact our ventures in the
nuclear and renewables industries.
End User/Aftermarket
Operators and end-users seek a combination of prompt local support and a
necessity for progress through equipment upgrades and modernisation.
Particularly in Western economies, where facilities exceed their intended
design lifespans, there is a notable demand for solution providers within the
supply chain to establish enduring partnerships with end-users. The Avingtrans
AES division is strategically positioned to thrive in this market space
focused on long-term collaborations with end-users.
Nuclear
Due to the Russia/Ukraine conflict, global government perspectives on nuclear
power have experienced a resurgence, emerging resiliently from prior concerns
about energy security. Despite being a low-carbon, baseload power source, the
nuclear energy market remains asymmetric in terms of future growth. The
majority of opportunities for new builds exceeding 1GW are presently
concentrated in Asia, with limited prospects in the UK and proposed programmes
in France. Nonetheless, certain market segments remain robust, including the
support of operational fleets, life extensions, decommissioning, and
reprocessing.
Our focus extends to the long-term development of next-generation technologies
such as Small Modular Reactors (SMRs) and Advanced Generation IV Reactors,
exemplified by our collaboration with TerraPower in the USA. These segments
suffer from a consolidating supply chain and a scarcity of expert knowledge.
The USA, boasting the largest civil nuclear fleet globally, coupled with the
presence of heritage Westinghouse technology in Europe and Asia, positions our
Hayward Tyler businesses for further growth.
Addressing obsolescence and life extension is crucial for nuclear operators
worldwide and the AES division is well-equipped to support operators in
managing this critical risk. Our Energy Steel business also enhances the
Group's capabilities in this domain.
The UK maintains a leading role in decommissioning, characterised by
innovative technology and substantial expenditures. Our Group plays a pivotal
role in the future manufacture of waste containers for Sellafield,
anticipating continued expansion in the UK and global markets over the long
term. Ongoing development of new nuclear technologies is evident in the UK,
South Korea, the USA, and China. The Group sees these innovations as an
attractive avenue for growth and is poised to evolve as a global industry
partner.
Power Generation
The global trend towards electrification persists, directing an increasing
share of primary energy toward the power sector, a central focus within the
Group's engineering division. Apart from nuclear, key sub-sectors encompass:
Coal: Despite a global decline in the establishment of new power stations, the
Group continues to witness robust aftermarket activity from coal-fired power
stations. Opportunities persist in regions such as India, China, Southeast
Asia, Eastern Europe, and the Middle East. Hayward Tyler is actively
diversifying its product applications, such as the introduction of Selective
Catalytic Reduction (SCR) systems, aimed at reducing emissions from power
stations.
Gas: The growing market for natural gas, particularly in the form of combined
cycle gas turbine power plants, is predominantly observed in the West. The
Group has a modest position in this market, with both existing and new product
lines.
Renewables: The global market for renewable technologies and their associated
infrastructure is expanding. The Group possesses a range of products
applicable to this market segment. Furthermore, the Group's expertise can be
leveraged to develop new products, including innovations like molten salt
pumps for concentrated solar power applications.
Hydrocarbons
Oil demand picked up following both the pandemic easing and then being driven
by the Russia / Ukraine conflict, despite weakness in the Chinese economy. The
Brent crude price is now trading in the range of $75 to $85 per barrel. As a
result, new capital expenditure in the sector has recovered and 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. The total Diagnostic Imaging Market is estimated
to be worth $47.4bn , according to Global Data, mainly driven by an increase
in the prevalence of chronic diseases and increased demand for imaging
procedures from an ageing population. 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.
Following the acquisition of Adaptix in the period, we are now targeting X-ray
imaging, also in the orthopaedic and veterinary imaging market segments.
According to ResearchAndMarkets, MRI itself is approximately 18% by value of
the total diagnostic imaging market and is projected to grow at 5% p.a. X-ray
itself represents circa 33% of the total market. For both Magnetica and
Adaptix, the addressable portion of the X-ray and MRI markets we believe we
can access is now estimated to be over $7bn (including veterinary
applications).
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.
Magnetica and Adaptix are planning to create new niche markets for MRI and
X-ray. Our first target is orthopaedic imaging, where the development of
Magnetica's system is on-going and Adaptix is now working on scaling up
production of its system, as well as a related system for veterinary imaging.
Infrastructure and Security
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, the vast majority of
Booth's sales are in the UK but the business is building up a prospect
pipeline overseas. We have also continued to build the aftermarket order book,
with good prospects.
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.
Following the acquisition of Adaptix, we are exploring various possible
security applications of their 3D X-ray technology products as tools in
various Non-Destructive Evaluation (NDE) markets, with an estimated
addressable market of c$1.4bn.
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 at
Hayward Tyler
Overall Group revenue increased by 30.4% to £65.2m (2023 H1: £50.0m). The
principal reason for the increase was additional OEM business at Hayward
Tyler, and aided by sales in S&P.
Gross margin ('GM') - a modest reduction, primarily due to OEM and aftermarket
mix
GM decreased to 31.6% (2023 H1: 32.6%), primarily a result of the increased
OEM sales in the mix and lower GM contribution by the recently acquired
S&P as it recovers its trading position.
Profit margin: EBITDA increase driven by increased revenue.
Adjusted EBITDA (note 4) increased by 14.1%, to £7.3m, on higher revenues
(2023 H1: £6.4m) mainly due to increased revenue and profit in the AES
division, in turn driven by improved results at Hayward Tyler, Booth and
Ormandy. However, this was subdued by the initial post-acquisition EBITDA
break-even at S&P and the pre commercialisation costs at Adaptix (£1.0m)
in the period. If these were excluded the underlying EBITDA would be £8.3m -
a c.30% increase in EBITDA.
Tax: future profits and cash still protected by available losses
The effective rate of taxation at Group level was a 15.6% tax charge. A higher
R&D tax credit than forecasted and the use of Group losses kept the rate
lower than expected 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.
Adjusted Earnings per Share (EPS): c8% improvement.
Adjusted diluted earnings per share from continuing operations was up at 11.7p
(2023 H1:10.8p) subdued by the impact of Adaptix and S&P acquisition in
H1.
Basic and diluted earnings per share from continuing operations remained at
8.8p (2023 H1: 8.8p) and 8.6p (2023 H1: 8.6p), due to acquisition, and
restructuring costs and the impact of the acquisitions in the period.
Funding and Liquidity: net debt position after investment but remains modest.
Net debt decreased to £2.2m, excluding IFRS16 debt (31 May 2023: £13.0m net
cash), following the acquisition of, and investment in Adaptix and S&P,
further investment in Magnetica and a working capital outflow resulting from
timing milestones of certain contracts. Cash outflow from operating activities
in the period was £3.6m (2023 H1: inflow £4.1m) - although this includes
operating cash outflow for the acquired S&P and Adaptix of £2.6m and
exceptional acquisition and restructuring costs of £0.5m.
Dividend: interim dividend progressively increased.
The Board is continuing with its policy of gradual increases in dividends. The
dividend is 1.8 pence per share (2023 H1: 1.7 pence). The dividend will be
paid on 21 June 2024, to shareholders on the register as at 24 May 2024.
ESG (Environmental, Social, and Governance)
Avingtrans is endeavouring to attain a high level of clarity on ESG matters.
We will be reporting on this task more fully, 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 level. Notably, at Board level, we
have now set up an ESG Committee, chaired by Jo Reedman.
At divisional management level, we merged the EPM and PSRE divisions to create
the AES division. Consequently, Austen Adams, formerly the managing director
of the PRSE division, has assumed leadership of this newly integrated
division. The Board would like to extend its sincere best wishes and gratitude
to Mike Turmelle, the former head of the EPM division, who has stepped down
from his role and left the Company. His contributions during his tenure at
Avingtrans are highly appreciated.
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 apprentice training school based at
Metalcraft continues to develop, with West Suffolk College (WSC) as the
operator and training provider at the centre. 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 frequent acquirers, we encounter varying levels of capability and knowledge
among different businesses. In smaller acquisitions, a common investment focus
is disseminating Health, Safety, and Environment (HSE) best practices from
other Group businesses, elevating local processes to meet required standards.
Larger acquisitions, such as HTG in the past, typically have well-established
HSE practices, and we actively seek to incorporate these learnings into other
business units. Health and Safety incident reporting has shown improvement
across the Group, with incident trends generally on a positive trajectory in
recent years. We encourage near miss reporting and foster knowledge exchange
to facilitate learning and continuous improvement. At the Board level, Les
Thomas oversees HSE matters, conducting inspections and reviews with local
management as needed. The Board takes an active interest in progress during
site visits around board meetings.
Operational eco-efficiency
We are pleased to report a significant reduction in carbon intensity at our UK
sites during FY23, with Scope 1 and 2 emissions decreasing by 21% to 2,104
tCO2e compared to the previous year, despite the growth in revenues. This
achievement is a testament to the focused efforts of our employees and the
development of a culture that prioritizes waste reduction.
To drive further improvements in FY24, we have established an ESG Committee
chaired by Jo Reedman, a Non-Executive Director. This committee will be
responsible for defining the Group's ESG strategy, as well as setting
objectives and key performance indicators.
Development of cleaner technologies
Our Hayward Tyler business continues to have success winning work for new
nuclear projects, securing a $10m contract during the period, relating to the
development of 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 sales expected to commence during 2024. 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 is actively investing in both of its divisions, concentrating on the
global energy, infrastructure and medical markets to optimise shareholder
value through future exits. Magnetica is advancing well in the development of
compact MRI systems, as is Adaptix in deploying its 3D X-ray technology.
Positive results are evident in various business units, notably at Booth and
Ormandy, as highlighted by the first-half outcomes. Our value creation goals
are on track, supported by a conservative approach to debt, especially crucial
during the current macroeconomic challenges.
The AES division maintains a robust focus on nuclear power, thermal, and
hydrocarbon markets, along with their associated aftermarkets. The MII
division is fully focussed on innovative compact MRI systems and 3D X-ray
solutions for niche applications. Each division has a clear strategy to
support end-user aftermarket operations, servicing their equipment and
relevant third-party equipment where appropriate, to capitalise on the ongoing
demand for efficient, reliable, and safe facilities.
Whilst ongoing disruptions in supply chains remain a primary uncertainty, we
believe that the situation will now gradually ease looking forward.
Inflationary pressures continue to impact our businesses, but we are actively
working to mitigate these risks, maintaining stable margins through
considerable proactive efforts by our business units. Conversely, the Group
does not suffer from destocking issues seen elsewhere, since our products are
"make to order".
Our markets are dynamic, and we prioritise strategic M&A opportunities. We
are particularly interested in turnaround prospects and long-term
buy-and-build scenarios, recognising that businesses like ours can achieve
high valuations at the point of exit. While the Board remains vigilant, we are
confident in the current direction and potential future opportunities across
our markets. We will refine our strategy by pinpointing specific acquisitions
as opportunities arise, building businesses that generate sustainable
shareholder value, all while maintaining a prudent level of financial
flexibility to mitigate unforeseen risks. With a strong first-half performance
and a robust order book, the Group is well-positioned to meet market
expectations for the full year.
Roger McDowell
Steve McQuillan
Stephen King
Chairman
Chief Executive Officer
Chief FinancialOfficer
27 February 2024
27 February 2024
27 February 2024
Consolidated Income Statement (Unaudited)
for the six months ended 30 November 2023
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Revenue 65,190 50,010 116,437
Cost of sales (44,567) (33,714) (78,137)
Gross profit 20,623 16,296 38,300
Distribution costs (2,722) (2,319) (4,458)
Other administrative expenses (14,340) (10,390) (25,866)
Operating profit before amortisation of acquired intangibles, other
non-underlying items and exceptional items
4,597 4,317 9,452
Amortisation of intangibles from business combinations
(410) (583) (993)
Other non-underlying items (129) (116) (237)
Acquisition costs (323) - (14)
Restructuring costs (174) (31) (232)
Operating profit 3,561 3,587 7,976
Finance income (Note 5) 287 2 109
Finance costs (Note 5) (483) (291) (609)
Profit before taxation 3,365 3,298 7,476
Taxation (Note 3) (525) (454) (1,246)
Profit after taxation from continuing operations 2,840 2,844 6,230
Loss after taxation from discontinuing operations - (327) (1,168)
Profit for the financial period 2,840 2,517 5,062
Profit is attributable to:
Owners of Avingtrans PLC 2,840 2,660 5,194
Non-controlling interest (207) (143) (132)
Total 2,633 2,517 5,062
Profit per share:
From continuing operations
- Basic (Note 6) 8.8p 8.8p 19.4p
- Diluted (Note 6) 8.6p 8.6p 18.9p
From continuing and discontinuing operations
- Basic (Note 6) 8.8p 7.8p 15.7p
- Diluted (Note 6) 8.6p 7.6p 15.3p
Consolidated statement of comprehensive income (Unaudited)
for the six months ended 30 November 2023
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Profit for the period 2,840 2,517 5,062
Items that will not be subsequently reclassified to profit or loss
Remeasurement of net defined benefit liability - - (1,388)
Income tax relating to items not reclassified - - 347
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations (358) 514 (579)
Total comprehensive profit for the period 2,482 3,031 3,442
Summarised consolidated balance sheet (Unaudited)
at 30 November 2023
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Non current assets
Goodwill 28,095 21,420 21,585
Other intangible assets 28,919 16,224 18,790
Property, plant and equipment 28,522 23,195 23,612
Investments - 4,000 8,000
Deferred tax asset 930 1,756 666
Pension and other employee obligations 526 1,829 526
86,992 68,424 73,179
Current assets
Inventories 19,369 13,945 12,656
Trade and other receivables: falling due within one year 57,832 49,213 49,691
Trade and other receivables: falling due after one year 1,479 1,518 1,550
Current tax asset 1,678 285 618
Assets held for sale - 1,614 -
Cash and cash equivalents 13,918 22,007 17,717
94,276 88,583 82,232
Total assets 181,268 157,007 155,411
Current liabilities
Trade and other payables (39,651) (32,496) (32,140)
Lease liabilities (2,658) (1,083) (1,503)
Borrowings (6,199) (2,676) (3,077)
Current tax liabilities (1,287) (941) (1,303)
Provisions (1,212) (1,659) (1,315)
Derivatives (13) (10) (15)
Liabilities associated with assets held for sale - (218) -
Total current liabilities (51,020) (39,082) (39,353)
Non-current liabilities
Borrowings (7,262) (674) (669)
Lease liabilities (5,628) (3,069) (3,328)
Deferred tax (3,976) (4,458) (3,238)
Other creditors (348) (1,268) (368)
Total non-current liabilities (17,214) (9,469) (7,603)
Total liabilities (68,234) (48,551) (46,956)
Net assets 113,034 108,455 108,455
Equity
Share capital 1,645 1,607 1,612
Share premium account 18,452 15,693 15,979
Capital redemption reserve 1,299 1,299 1,299
Translation reserve 1,152 1,368 1,170
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 61,545 60,490 59,811
Total equity attributable to equity holders of the parent 110,264 106,628 106,042
Non-controlling interest 2,770 1,827 2,413
Total equity 113,034 108,455 108,455
Consolidated statement of changes in equity (Unaudited)
at 30 November 2023
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 2022 1,607 15,693 1,299 28,949 825 1458 (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
At 1 Dec 2022 1,607 15,693 1,299 28,949 1,368 1,458 (4,235) 60,490 106,628 1,827 108,455
Ordinary shares issued 5 286 - - - - - - 291 - 291
Dividends paid - - - - - - - (824) (824) - (824)
Share-based payments - - - - - - - 123 123 - 123
Total transactions with owners 5 286 - - - - - (701) (410) - (410)
Profit for the period - - - - - - - 2,534 2,534 11 2,545
Investment in subsidiary with non-controlling interest - - - - 895 - - (1,470) (575) 575 -
Other comprehensive income
Actuarial gain for the period on pension scheme - - - - - - - (1,388) (1,388) - (1,388)
Deferred tax on actuarial movement on pension scheme - - - - - - - 347 347 - 347
Exchange gain - - - - (1,093) - - - (1,093) - (1,093)
Total comprehensive income for the period - - - - (198) - - 23 (175) 586 410
Balance at 1,612 15,979 1,299 28,949 1,170 1,458 (4,235) 59,812 106,043 2,413 108,455
31 May 2023
At 1 June 2023 1,612 15,979 1,299 28,949 1,170 1,458 (4,235) 59,812 106,043 2,413 108,455
Ordinary shares issued 33 2,473 - - - - - - 2,506 - 2,506
Dividends paid - - - - - - - (538) (538) - (538)
Share-based payments - - - - - - - 129 129 - 129
Total transactions with owners 33 2,473 - - - - - (409) 2,097 2,097
-
Profit for the period - - - - - - - 2,633 2,633 207 2,840
Investment in subsidiary with non-controlling interest - - - - 340 - - (490) (150) 150 -
Other comprehensive income
Exchange rate loss - - - - (358) - - - (358) - (358)
Total comprehensive income for the period - - - - (18) - - 2,143 2,125 357 2,482
Balance at 1,645 18,452 1,299 28,949 1,152 1,458 (4,235) 61,545 110,264 2,770 113,034
30 Nov 2023
Consolidated cash flow statement (Unaudited)
for the six months ended 30 November 2023
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Operating activities
Cash flows from operating activities (2,000) 4,639 10,682
Finance costs paid (586) (301) (620)
Income tax paid (1,045) (78) (331)
Contributions to defined benefit plan - (141) (164)
Net cash (outflow)/inflow from operating activities (3,631) 4,119 9,567
Investing activities
Purchase of unlisted investments - - (4,000)
Acquisition of subsidiary undertakings (1,548) - (852)
Finance income 287 2 109
Purchase of intangible assets (2,619) (1,358) (5,401)
Purchase of property, plant and equipment (805) (722) (3,291)
Net cash used by investing activities (4,685) (2,077) (12,524)
Financing activities
Equity dividends paid (538) (507) (1,331)
Repayments of bank loans (1,743) (3,047) (2,843)
Repayments of leases (1,161) (707) (1,771)
Proceeds from issue of ordinary shares - - 291
Borrowings raised 8,039 - 2,254
Net cash inflow/(outflow) from financing activities 4,596 (4,261) (3,400)
Net decrease in cash and cash equivalents (3,720) (2,220) (6,356)
Cash and cash equivalents at beginning of period 17,386 23,902 23,902
Effect of foreign exchange rate changes (73) (61) (160)
Cash and cash equivalents at end of period 13,593 21,622 17,386
Cashflows from operating activities (Unaudited)
for the six months ended 30 November 2023
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Profit before income tax from continuing operations 3,363 3,299 7,475
Loss before income tax from discontinuing operations - (327) (616)
Adjustments for:
Depreciation of property, plant and equipment 2,404 2,023 3,720
Amortisation of intangible assets 227 117 444
Amortisation of intangibles from business combinations 410 583 993
Loss on disposal of property, plant and equipment 7 10 -
Loss on disposal of intangible assets - - 373
Finance income (287) (2) (109)
Finance expense 483 291 609
Share based payment charge 129 114 237
Changes in working capital
Increase in inventories (5,028) (2,363) (729)
Increase in trade and other receivables (7,536) (2,673) (3,628)
Increase in trade and other payables 4,021 3,719 2,814
Decrease in provisions (190) (139) (857)
Other non-cash changes (3) (10) (44)
Cash (outflow)/ inflow from operating activities (2,000) 4,639 10,682
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Cash and cash equivalents
Cash 13,918 22,007 17,717
Overdrafts (325) (385) (331)
13,593 21,622 17,386
Notes to the half year statement
30 November 2023
1. Basis of preparation
The Group's interim results for the six-month period ended 30 November 2023
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 2024. 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 27 February 2024 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 2024.
The statutory accounts for the year ended 31 May 2023, 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 Medical Unallocated central items Total
AES MII
£'000 £'000 £'000 £'000
6 months to 30 November 2023
Original equipment 40,661 1,318 - 41,979
Aftermarket 23,050 161 - 23,211
Revenue 63,711 1,479 - 65,190
Operating profit/(loss) 5,529 (1,140) (828) 3,561
Net finance costs (196)
Taxation (525)
Profit after tax from continuing operations 2,840
Notes to the half year statement
30 November 2023
Energy Medical Unallocated central items Total
AES MII
£'000 £'000 £'000 £'000
Year ended 31 May 2023
Original equipment 66,802 3,595 - 70,397
Aftermarket 46,006 34 - 46,040
Revenue 112,808 3,629 - 116,437
Operating profit/(loss) 10,145 (1,010) (1,159) 7,976
Net finance costs (500)
Taxation (1,246)
Profit after tax from continuing operations 6,230
Energy Medical Unallocated central items Total
AES MII
£'000 £'000 £'000 £'000
6 months to 30 November 2022
Original equipment 29,889 1,498 - 31,387
Aftermarket 18,621 2 - 18,623
Revenue 48,510 1,500 - 50,010
Operating profit/(loss) 4,480 (310) (582) 3,588
Net finance costs (289)
Taxation (454)
Profit after tax from continuing operations 2,844
3. Taxation
The taxation charge is based upon the expected effective rate for the year
ended 31 May 2024.
Notes to the half year statement
30 November 2023
4. Adjusted Earnings before interest, tax, depreciation and
amortisation
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Profit before tax from continuing operations 3,365 3,298 7,476
Share based payment expense 129 114 237
Acquisition costs 323 - 14
Restructuring costs 174 31 232
Other exceptionals - 2 -
(Loss)/gain on derivatives (3) 9 14
Amortisation of intangibles from business combinations 410 583 993
Adjusted profit before tax 4,398 4,037 8,966
Finance income (287) (2) (109)
Finance cost 483 291 609
(Loss)/ gain on derivatives 3 (9) (14)
Adjusted profit before interest, tax and amortisation from business
combinations ('EBITA')
4,597 4,317 9,452
Depreciation 2,406 1,906 3,720
Amortisation of other intangible assets 227 117 444
Amortisation of contract assets 71 61 130
Adjusted Earnings before interest, tax, depreciation and amortisation
('EBITDA')
7,301 6,401 13,746
5. Finance income and costs
6 months to 6 months to Year to
30 Nov 30 Nov 31 May
2023 2022 2023
£'000 £'000 £'000
Finance income
Bank balances and deposits 85 2 47
Gain on the fair value of derivative contracts 3 - -
Interest from other 199 - 62
287 2 109
Finance costs
Interest on banking facilities and lease liabilities 483 282 605
Loss on the fair value of derivative contracts - 9 14
483 291 609
Notes to the half year statement
30 November 2023
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 2023 30 Nov 2022 31 May 2023
No No No
Weighted average number of shares - basic 32,373,636 32,141,445 32,187,135
Share Option adjustment 664,652 939,646 820,074
Weighted average number of shares - diluted 33,038,288 33,081,091 33,007,209
£'000 £'000 £'000
Earnings from continuing operations 2,840 2,844 6,230
Share based payments 129 114 237
Acquisition costs 323 - 14
Restructuring costs 174 31 232
Other exceptionals - 2 -
(Gain)/loss on derivatives (3) 9 14
Amortisation of intangibles from business combinations 410 583 993
Adjusted earnings from continuing operations 3,873 3,583 7,720
From continuing operations:
Basic earnings per share 8.8p 8.8p 19.4p
Adjusted basic earnings per share 12.0p 11.1p 24.0p
Diluted earnings per share 8.6p 8.6p 18.9p
Adjusted diluted earnings per share 11.7p 10.8p 23.4p
Earnings from discontinuing operations - (327) (1,168)
From discontinuing operations:
Basic loss per share - (1.0)p (3.6)p
Adjusted loss per share - (1.0)p (3.6)p
Diluted loss per share - (1.0)p (3.5)p
Adjusted diluted loss per share - (1.0)p (3.5)p
Earnings attributable to shareholders including non-controlling interest
3,873 3,256 5,062
Basic earnings per share 8.8p 7.8p 15.7p
Adjusted basic earnings per share 12.0p 10.1p 20.4p
Diluted earnings per share 8.6p 7.6p 15.3p
Adjusted diluted earnings per share 11.7p 9.8p 19.9p
The Directors believe that the above adjusted earnings per share calculation
from continuing operations is the most appropriate reflection of the Group
performance.
Notes to the half year statement
30 November 2023
7. Net (debt)/cash and gearing
The gearing ratio at the year-end is as follows: 30 Nov 2023 30 Nov 2022 31 May 2023
£'000 £'000 £'000
Cash 13,918 22,007 17,717
Loans (13,136) (2,965) (3,416)
Lease liability - finance leases under IAS17 (2,683) (1,406) (952)
Lease liability - under IFRS 16 (5,603) (2,746) (3,879)
Overdrafts (325) (385) (331)
Net (debt)/cash (7,829) 14,505 9,140
Equity 113,034 108,455 108,455
Net (debt)/cash to equity ratio (6.9)% 13.4% 8.4%
Net (debt)/cash to equity ratio excluding IFRS16 debt (2.0)% 15.9% 12.0%
8. Events after the balance sheet date
Business combinations: Acquisition of Adaptix Limited
On 15 September 2023, the Group acquired the remaining 82% of Adaptix
Limited's ("Adaptix") share capital, thereby gaining control. In exchange for
the 82% of shares in Adaptix, Avingtrans issued shares valued at £2,505,000
on the date of acquisition. Immediately prior to the acquisition, the Group
held an 18% shareholding in Adaptix, which was purchased for cash
consideration of £6,005,000.
Adaptix are an emerging Medtech business, developing 3D x-ray technologies.
The product launch plans of Adaptix align with the Group's Magnetica business,
which is developing compact magnetic resonance imaging technology. This
alignment enables both businesses to mutually benefit by coordinating their
commercialization activities.
Consideration has been calculated using the accumulated cost method, and
comprises:
£'000
Cash consideration 6,005
Issued shares 2,505
Total purchase consideration 8,510
The fair value of the 642,355 issued shares was based on the published closing
share price on the 15(th) September 2023 of 390 pence per share.
The provisional assets and liabilities recognised as a result of acquisition
were as follows:
£'000
Other intangible assets: technology 8,219
Property, plant and equipment 1,883
Deferred tax assets 2 2,054
Inventories 323
Trade and other receivables 567
Current tax asset 701
Cash 152
Trade and other payables (1,883)
Amounts owing to group undertakings (3,299)
Provisions (157)
Lease liabilities (626)
Borrowings (3,563)
Deferred tax liabilities (2,336)
Net identifiable assets acquired 2,033
Goodwill 6,477
Consideration 8,510
Amounts owing to group undertakings represents loans issued to Adaptix prior
to the acquisition.
Goodwill is attributable to Adaptix's workforce and future growth potential,
plus synergies with our existing medical imaging businesses.
The acquired business contributed revenues of £24,000 and a net loss of
£1,433,000 to the Group for the period ended 30 November 2023.
Cashflow
£'000
Inflow of cash to acquire subsidiary:
Cash consideration paid in the period -
Cash acquired 152
Net cash inflow from investing activities 152
All cash consideration paid for Adaptix was transferred in previous accounting
periods, so does not impact the current period cashflow.
Acquisition related costs of £200,000 have been presented as exceptional
costs in the income statement and in operating cashflows in the statement of
cashflows.
Business combinations: Acquisition of Slack and Parr Limited
On the 6 August 2023, Hayward Tyler Fluid Handling Limited, a subsidiary of
Avingtrans, completed the acquisition of the trade and assets of Slack and
Parr Limited, along with its overseas subsidiaries in the USA and China.
Slack and Parr is renowned for its specialism in manufacturing high-precision
gear metering pumps, hydraulics flow dividers, and industrial pumps, is a
market leading supplier catering to a global customer base.
This strategic acquisition enhances Hayward Tyler's existing businesses by
introducing additional products, expanding market reach, and in bringing in
valuable expertise and equipment from Slack and Parr.
£'000
Cash consideration 1,867
Total consideration 1,867
Consideration was transferred in stages. All consideration has been paid by 30
November 2023.
The provisional assets and liabilities recognised as a result of acquisition
were as follows:
£'000
Property, plant and equipment 5,035
Inventories 1,608
Trade and other receivables 390
Current tax asset -
Cash 164
Trade and other payables (999)
Provisions (200)
Amounts owing to group undertakings (478)
Lease liabilities (related to plant and equipment acquired and property lease) (3,686)
Net identifiable assets acquired 1,834
Goodwill 33
Consideration 1,867
Amounts owing to group undertakings represents loans issued from Hayward Tyler
Fluid Handling at the point of acquisition.
Goodwill is attributable to Slack and Parr's workforce, brand and future
growth potential, plus synergies with our existing Hayward Tyler businesses.
The acquired business contributed revenues of £3,205,000 and a net loss of
£396,000 to the Group for the period ended 30 November 2023.
Cashflow
£'000
Outflow of cash to acquire subsidiary:
Cash consideration paid in the period 1,867
Cash acquired (164)
Net cash outflow from investing activities 1,703
Acquisition related costs of £123,000 have been presented as exceptional
costs in the income statement and in operating cashflows in the statement of
cashflows.
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