REG - Avingtrans PLC - Preliminary results for the year ended 31 May 2022
28/09/2022 07:00
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RNS Number : 9090A Avingtrans PLC 28 September 2022
28 September 2022
Avingtrans Plc
("Avingtrans", the "Company", or the "Group")
Preliminary results for the year ended 31 May 2022
Avingtrans PLC (AIM: AVG), which designs, manufactures and supplies critical
components, modules, systems and associated services to the energy, medical
and industrial sectors, is pleased to announce its preliminary results for the
year ended 31 May 2022.
Financial Highlights
· Revenue from continuing operations increased by 1.9% to £100.4m
(2021: £98.5m)
· Gross Margin improved by 360 basis points to 34.0% (2021: 30.4%)
· Adjusted(1) EBITDA from continuing operations increased slightly
to £12.7m (2021: £12.5m)
· Adjusted(1) PBT from continuing operations increased to £8.2m
(2021: £7.7m)
· Adjusted(1) Diluted earnings per share from continuing
operations reduced slightly to 21.8p (2021: 22.4p) due to increased tax charge
· Net Cash (excluding IFRS16) of £16.7m (31 May 2021: £23.3m)
following investment in business
· Final Dividend 2.6p per share (2021: 4.0p) resulting in a total
dividend for the year of 4.2p (2021: 4.0p)
(1 )Adjusted to add back amortisation of intangibles from business
combinations, acquisition costs and exceptional items
Operational Highlights
Energy
· Revenue increased 5.7% to £97.9m (2021: £92.7m)
· Metalcraft contract progressed to next phase to supply the
Sellafield 3M3 boxes - up by £20m to £70m
· Booth continues to recover strongly and has completed its factory
extension for the HS2 contract
· Hayward Tyler and Energy Steel win multiple nuclear bids,
including next generation enabling contracts
· Apprentice training school at Chatteris completed and handed over
to operator, West Suffolk College
· Energy Steel restructured and moved to new, smaller facility in
Michigan
· Acquired Transkem for £0.6m (net of cash) plus deferred
consideration £0.4m. Concluded the successful integration into Fluid Handling
in East Kilbride
Medical
· Revenue decreased to £2.5m (2021: £5.8m) following pivot away
from 3rd party component manufacture
· Compact helium-free MRI system making good progress - expected to
launch in Q4 calendar 2023
· Complementary £4.0m (11.9%) stake purchased in emerging 3D X-ray
leader, Adaptix, in Oxford, UK
· Adaptix has launched its veterinary product and submitted its
510(K) to FDA in USA for orthopaedics
· Potentially significant market opportunities in the target
imaging markets for both businesses
Current Trading & Outlook
· In the quarter since 31 May 22 the Group has generally performed
as expected
· The Board remains cautiously confident about the current
strategic direction and potential future opportunities across our markets
· We will continue to refine our business by pinpointing specific
additional acquisitions as the opportunities arise, to create superior
shareholder value, whilst maintaining a prudent level of financial headroom,
to enable us to endure any subsequent headwinds.
Commenting on the results, Roger McDowell, Chairman, said:
"Once again, the pugnacity of the Group was tested and I'm pleased to report
that we stoically fought our way through, despite multiple counterpunches and
headwinds. With a strong balance sheet, we moved to invest in capex and new
technologies in our existing businesses; bought bolt-on business, Transkem,
for Fluid Handling; invested in 3D X-ray pioneer Adaptix; as well as
continuing to invest in Magnetica - all with an eye on amplifying our impact
in potentially disruptive nuclear and medical imaging markets. The commotions
may continue, but we remain agile and steady on our feet - a great tribute to
our management teams and all of our employees."
Enquiries:
Avingtrans plc 01354 692391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Singer Capital Markets (Nominated Adviser) 02074 963000
Shaun Dobson / Alex Bond / Oliver Platts (Corporate Finance)
Rachel Hayes (Corporate Broking)
IFC Advisory (Financial PR) 020 3934 6630
Graham Herring, Tim Metcalfe, Zach Cohen
About Avingtrans plc:
Avingtrans designs, manufactures and supplies original equipment, systems and
associated aftermarket services to the energy, medical and industrial markets
worldwide.
Business units
Hayward Tyler - Luton & East Kilbride, UK,USA, China and India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Energy Steel, Inc - Rochester Hills, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising in: OEM
parts obsolescence; custom fabrications; engineering design solutions; product
refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK 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 and explosion proof; fireproof; acoustically shielded;
high security/safety; or combinations of the above.
Ormandy Group - Bradford, UK
Design, manufacturers and servicing of off-site plant, heat exchangers and
other HVAC (heating, ventilation and air conditioning) products.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving customers in
industrial markets.
Magnetica Ltd - Brisbane, Australia
Magnetica Limited specialises in the development of next generation MRI
technologies, including dedicated extremity MRI systems and MRI system
components. Magnetica has successfully built and tested a compact, integrated
3 Tesla orthopaedic MRI system, demonstrating clinical-quality imaging.
Commercialisation of this system (and others) is on-going. Magnetica's
structure now includes two other business units:
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and associated
cryogenics for a variety of markets including MRI and provides services for
Nuclear Magnetic Resonance instruments.
Tecmag Inc - Houston, USA
Designs, manufactures and installs instrumentation, including consoles, system
upgrades, and probes, mainly for Magnetic Resonance Imaging (MRI) and Nuclear
Magnetic Resonance (NMR) systems.
Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
("MAR") prior to its release as part of this announcement and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.
Chairman's Statement
The latest financial year saw the Group deliver another solid performance
across the board, notwithstanding the on-going "bullwhip" disruptive effects
generated by the pandemic and the Russia-Ukraine conflict. The Board is
pleased with the Group's performance for the year, with robust adjusted EBITDA
(note 2) from continuing operations and a stable net cash position at the year
end, following investments in Magnetica, Adaptix and Transkem in the period.
All Group businesses have experienced supply chain disruptions and customer
order delays, but we have successfully circumvented these issues to deliver
the expected results and our order book position going into FY23 is both
robust and secure.
We deployed our evergreen Pinpoint-Invest-Exit ("PIE") strategy with the
further investment in medical imaging at Magnetica being reinforced by
investment in the 3D X-ray business, Adaptix, based in Oxford. Both businesses
are making good progress towards launching disruptive and complementary
medical imaging products, notably for orthopaedics applications. We also
completed the bolt-on acquisition of Transkem in Scotland, which has
strengthened the market credentials of the Fluid Handling business there.
Despite the external macroeconomic events, our divisional management teams
have demonstrated their agility and resilience in the period, continuing to
build strong business platforms.
Aftermarket growth in Engineered Pumps and Motors (EPM) and Process Solutions
and Rotating Equipment (PSRE) held-up well and remains central to our value
propositions, in order to support OEM and end-user customers. The improving
sentiment in the nuclear and oil and gas sectors is generally positive for the
Group and this is already manifesting through increased orders in those areas.
Our end-user access drives improved profitability and underpins product and
service development.
Overall, the EPM division delivered an improved result for the year, despite
disruptions to supply chains and order placement. Energy Steel continued to
recover positively, with good aftermarket prospects, having moved to a
smaller, optimal facility at the start of the period. In the period, we put
the potential sale of the HT Luton site on hold, after the original bidder
withdrew its offer. We have since had renewed interest in the site, so we are
currently considering our options.
The PSRE division has delivered another year of solid progress, with Booth
going from strength to strength. In the period, we were delighted to confirm
the transition of the important 3M3 box contract with Sellafield to the volume
production phase and with an enhanced contract value, up by £20m, to £70m.
The new apprentice training school on the Chatteris site was completed and the
first intake began in September 2022, as planned.
The investment in Adaptix has cemented the position of the Medical and
Industrial Imaging (MII) division as a new niche imaging player, with
disruptive X-ray and MRI products in the pipeline. Our eyes are firmly fixed
on the market prospects in orthopaedic with Adaptix anticipating the launch of
an orthopaedic X-ray product in the coming months and Magnetica on-track to
launch their MRI orthopaedic product later in 2023. The Board is excited about
the potential of the division, which is expected to yield longer term positive
returns for the Group, albeit potentially via a different vehicle to maximise
returns, rather than our standard "PIE" process for more mature businesses.
Given the encouraging overall results for the year, the Board believes that it
is appropriate to propose a final year dividend of 2.6 pence per share,
resulting in a total dividend of 4.2p.
With a robust balance sheet, the Group continues to seek further shareholder
value enhancing M&A opportunities, though we will be cautious and
selective, given the extreme pressures on the manufacturing sector at present.
Finally, I applaud all Avingtrans employees old and new, for the dedication
and resilience that they continue to display in a testing environment.
Roger McDowell
Chairman
27 September 2022
Strategy and business review
Group Strategy
Our core strategy is to buy and build engineering companies in niche markets,
particularly where we see turnaround and consolidation prospects; a strategy
we call Pinpoint-Invest-Exit ("PIE"). We have had a strong track record in
returning significant shareholder value over the past decade.
With an increased presence in our target markets, a focus on aftermarkets,
strength in depth of the management teams and a lean central structure, the
Group continues to grow profitably - despite the effects of macroeconomic
disruptions - and the Board is focused on seeking additions to the Avingtrans
value-add proposition.
The majority of the Group's adjusted key financial metrics trended positively
in the period, despite the ongoing impacts of Covid-19 and the Russia-Ukraine
conflict.
The Group is focused on the global Energy and Medical markets, both of which
play into some of the world's mega-trends, such as: Urbanisation; an ageing
population; and an accelerating transition towards a cleaner and healthier
planet.
Divisional Strategies
Engineered Pumps and Motors (Energy - EPM): EPM continues to develop its
nuclear installed base (civil, defence and national security) - notably for
life extension applications - and its offering to the hydrocarbon market
sectors. Energy Steel in North America (acquired in June 2019), which
specialises in nuclear life extension, continues to recover well. In addition,
the EPM business is developing solutions for new nuclear technologies and
other low carbon energy sources, such as concentrated solar, to capitalise on
the global energy supply transition. During FY22, EPM delivered a number of
key contracts, including more pumps for next generation nuclear business
TerraPower in the USA and life extension equipment to the Forsmark nuclear
power station in Sweden. Partnership agreements (eg with Ruhrpumpen and
Shinhoo) are an important element of the EPM strategy, providing us with a
broader product portfolio and cross-selling opportunities.
Process Solutions and Rotating Equipment (Energy - PSRE): Here, the primary
strategy is to develop a comprehensive offering to the nuclear decommissioning
and reprocessing markets, building on the long-term contracts to build nuclear
waste storage containers and the installed base of equipment across the vast
Sellafield site. During the period, Metalcraft and Sellafield Limited entered
into the second phase of the contract to provide high integrity stainless
steel storage boxes for Sellafield. The 3M3 ('three metre cubed') box contract
is now worth up to £70m, being a £20m uplift to the original contract
awarded in 2015. In the year, the division's nuclear credentials were enhanced
by the strong recovery of Booth Industries, which also broadens our market
reach into Critical National Infrastructure (CNI). Booth's multi-year contract
with HS2, worth £36m, is progressing well. The PSRE division continues to
benefit from a strong prospect pipeline and remains well placed to bid for
these opportunities as they arise.
Medical and Industrial Imaging (Medical - MII): Following the Magnetica
acquisition in January 2021, the focus for the medical division pivoted
towards becoming a niche market leader in the production of compact
helium-free MRI systems, for applications such as orthopaedic and veterinary
imaging. This is an exciting opportunity for the Group. In parallel, we have
exited from volume MRI components supply to customers such as Siemens,
preferring to concentrate on our own product development. In support of the
core strategy, the division will continue to work on niche Nuclear Magnetic
Resonance (NMR) and scientific magnet products and services, since these are
complementary technologies. During the year, we made a strategic and highly
complementary £4m investment in emerging medtech leader Adaptix, based in
Oxford, UK. Adaptix's 3D X-ray technology is being developed in parallel to
Magnetica's MRI technology and the two businesses are working in an
increasingly synergistic manner.
The common theme which we are seeking to develop across the energy and medical
divisions, is the continued pressure on aftermarket expenditure, where
operational efficiency, reliability and safety are paramount and operators are
looking to their supply chain partners to provide long term support of both
new infrastructure and legacy installations.
Pinpoint-Invest-Exit
Continuing our Pinpoint-Invest-Exit strategy, Avingtrans increased its stake
in Magnetica to 61.3% in the period, as well as completing the £4m (11.9%)
investment in Adaptix, as noted above. We also acquired industrial mixer
specialist, Transkem, in Glasgow, and merged this business with our Fluid
Handling business in East Kilbride, to widen its market offering. The
integration of Transkem is complete and we sold the associated building in
early 2022.
The progress of previous acquisitions, Booth and Energy Steel, were
gratifying, as both businesses contributed strongly to the results of their
respective divisions.
Avingtrans remains confident about the current strategic direction and
potential future opportunities across its chosen markets. If anything, some of
our markets (eg Nuclear) have seen their standing rise because of the global
disruptions seen in the current year, which have caused energy costs to rocket
and caused governments to review energy security.
Markets - Energy
The global demand for energy continues unabated and we believe that we will
see a consistent period of growth over the next few years. The after effect of
the pandemic seemed to be a drive towards increased efficiency and
decarbonisation. However, the Russia-Ukraine conflict has also heightened
political awareness of the need for energy security and this appears to have
rebalanced the rush to renewable energy in the short to medium term, which may
benefit our businesses, notably in the nuclear sector.
End User/Aftermarket
Operators and end-users demand a blend of quick response through local support
and a requirement to drive improvements through equipment upgrades and
modernisation. In the West, where facilities are being operated for much
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
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
programme. However, we are still experiencing buoyant market segments,
including supporting the operational fleet, continued safe operation and life
extensions, decommissioning and reprocessing. We are also working on the
long-term development of the next generation of technologies - i.e. Small
Modular (SMR), or Advanced Generation IV Reactors - e.g. with TerraPower and
GE-Hitachi. In addition, these segments all have the backdrop of a
consolidating supply chain and paucity of expert knowledge.
The USA still operates the biggest civil nuclear fleet in the world, with 93
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. In
addition, recent events have even caused Germany and Japan to reconsider their
stance on nuclear energy.
The UK remains pre-eminent when it comes to decommissioning and reprocessing,
in terms of innovative technology and overall spend. The Group is embedded in
the future manufacture of waste containers for Sellafield and will continue to
expand its presence in the UK and globally in the longer term. The development
of new nuclear technologies is ongoing, with activity in the UK, South Korea,
the USA and China dominating development activity. The Group views these new
technologies as an attractive route forward for nuclear and is well positioned
to develop as a global industry partner.
Power Generation
The world continues to electrify, with an increasing amount of primary energy
going to the power sector, which remains a key focus across the Group's energy
divisions. Aside from nuclear, the main sub-sectors are as follows:
· Coal - the Group continues to see good aftermarket activity from coal
fired power stations even though the demand for new power stations is in
decline. Opportunities still exist in India, China, South East Asia, Eastern
Europe and the Middle East. EPM is optimising its product line, to take market
share and to create new opportunities - e.g. in products to remove toxins from
the exhaust stacks of power stations.
· Gas - natural gas, primarily in the form of combined cycle gas
turbine power plants has been a growing market space, primarily in the West,
albeit now disrupted by the Russia-Ukraine conflict. The Group continues to
develop this market with both existing and new product lines.
· Renewables - renewable technologies and their supporting
infrastructure are a growing market globally. The Group has a range of
products that can be applied directly to this market segment and also has
expertise that can be used to develop new products for niche parts of this
market, such as molten salt pumps for concentrated solar applications.
Hydrocarbons
The conflict in Ukraine has pushed European gas prices to record highs and
created unprecedented levels of volatility. In response, the European Union is
taking steps to reduce its reliance on oil & gas, by maximising supplies
from alternative sources. The oil & gas fields of the Norwegian Shelf have
for a long time been the principal market for our Hayward Tyler businesses
range of subsea and submersible pumps and motors. Over the past few months, we
have begun to benefit from the increasing demand for both new equipment and
aftermarket services to supply this market. Most informed forecasts are
suggesting sustained, or perhaps even higher prices to come.
Markets - Medical
The Diagnostic (medical) and molecular imaging markets are large global
sectors, dominated by a few large systems manufacturers. The total Medical
Imaging Market is estimated to be worth $32bn in 2022, according to Grand View
Research and is expected to continue to grow at 5% per annum until 2030. The
largest market is the USA, followed by Europe and Japan. The fastest growing
markets are China and India. Following the acquisition of a majority stake in
Magnetica (AUS) in January 2021, we merged Magnetica with Scientific Magnetics
(UK) and Tecmag (US) and we have continued to invest in Magnetica. The
objective of this pivot is 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 orthopaedic and veterinary
imaging. In the period, we completed a £4m (11.9%) investment in Adaptix, an
emerging medtech leader in the field of 3D X-ray equipment. The development
paths of Magnetica and Adaptix are convergent, which enables both businesses
to benefit from efficiency and cost gains, as well as optimising the route to
market - especially in orthopaedics. Market drivers for these segments include
an ageing global population and the rising incidence of chronic diseases.
The growing prevalence of chronic diseases, especially in older populations,
is increasing demand for medical imaging in hospitals and other diagnostic
clinics. Technical innovations, including advances in artificial intelligence,
have increased the reliability and accuracy of medical imaging, thus driving
further demand in global healthcare. Medical imaging proved invaluable during
the pandemic, to diagnose and treat patients with Covid-19. On the other hand,
the market is somewhat inhibited by the high cost of medical imaging systems.
X-ray systems accounted for circa 32% market share in 2021, with MRI systems
at around 18%. We estimate that over 20% of all diagnostic imaging scans are
of limbs. Therefore, the maximum combined addressable medical imaging market
for Magnetica and Adaptix is circa $3bn, in theory. However, the actual
addressable market is smaller, since neither business is targeting sales to
hospitals - preferring to focus the product deployment on (eg) specialist
orthopaedic clinics, where the product attributes are a close match to their
needs. Both businesses intend to target other imaging markets - notably
veterinary - where the lack of dedicated products has hampered the widespread
use of imaging systems.
End User/Aftermarket
Diagnostic imaging is dominated by a handful of manufacturers, including GE,
Siemens, Philips and Canon, who account for circa 80% of revenue globally.
These players also dominate the aftermarket, though there are a few
independent MRI service businesses in existence. Avingtrans is not present in
the MRI aftermarket at this time.
Operations
Operational Key Performance Indicators (KPI's) for continuing operations
2022 2021
· Percentage of total continuing revenue deriving from aftermarket (AM)
sales (%) 42.0 41.4
· Customer quality - defect free deliveries (%)
93.6 98.9
· Customer on-time in-full deliveries (%)
80.5 69.8
· Annualised staff turnover including restructuring (%)
17.4
22.0
· Health and Safety incidents per head per annum
0.07 0.07
· Environmental incidents per annum
0 0
The AM sales % has improved marginally. This is mainly due to an increase in
demand for nuclear spares following a change in government energy policy in
South Korea.
Whilst customer quality continues to suffer slightly from Covid related
disruptions, we were pleased to have seen improvements to on-time in full
(OTIF) deliveries, following targeted plans on Covid induced supply chain
disruptions, albeit that our performance here is still below pre-pandemic
levels
Annualised staff turnover has fallen, since no significant restructuring
exercises having been undertaken in the reporting period. In the prior year,
there was restructuring at EPM (caused by Covid-19 effects on the oil and gas
market) and at Metalcraft (driven by our exit from the MRI component
manufacturing business).
H&S incidents per head per annum is flat at 0.07, following many years of
gradual improvement in this measure. Whilst this is a little disappointing,
given the improvements we have made to a number of facilities, it is likely
that we are getting close to a level where further improvement is increasingly
difficult.
As in 2021, there were zero environmental incidents recorded in the Group.
EPM Division - Energy
In the EPM division, comprising of Hayward Tyler and Energy Steel, the main
priorities remain to strengthen the aftermarket capabilities and to maximise
opportunities in the nuclear life extension market.
The division's results further improved in the period, having been disrupted
by Covid-19 previously. Some adverse Covid-19 effects continued during the
year, with order delays and supply chain disruptions still evident, but the
impact was less pronounced than in the prior year.
At HT Luton, aftermarket activities continue to grow, including the servicing
of third-party equipment. In hydrocarbons, new equipment and aftermarket
opportunities have refilled the prospects hopper, with global disruptions and
UK government windfall tax initiatives increasing investment in this area. The
£10m contract with Vattenfall for the Forsmark plant (for nuclear life
extension) was successfully completed in the period, with only some final
payments to be received in the new financial year. Further defence orders have
been received and are being executed on target, with HT receiving a silver
award from Rolls Royce, in recognition of the excellent quality and delivery
performance in the last couple of years. In the period, we put the potential
sale of the HT Luton site on hold for the present, after the original bidder
withdrew their offer. We have since had renewed interest in the site, so we
are currently considering our options, as the commercial conditions have
changed since we first marketed the site.
HT Inc in Vermont (USA) continued to see good order intake in the nuclear life
extension market in the USA - and with KHNP, South Korea, although delays in
order intake again affected the results in the US. Proactive procurement
blunted the impact of the delays, at the expense of a temporary increase in
working capital. HT Inc's new R&D opportunities - for example in next
generation nuclear power - are forging ahead, with further orders received
from TerraPower, post period end.
HT Kunshan (China) had a good year, with a number of new orders being received
and a strong pipeline to follow, resulting from the Chinese government
initiative to reduce emissions from coal fired power stations. This has given
HT a new product line to pursue in the short to medium term.
HT India continued to suffer from disruptions due to Covid-19, but the
business was, nonetheless, able to turn in a solid performance in the period.
EPM Division (continued)
Energy Steel ('ES') in Michigan (USA), continued on its recovery path, with an
improved set of results from the previous year. At the start of the year, ES
completed a move to a new smaller facility, reducing overheads and rightsizing
its capacity. The business has been winning new orders from a broader market
footprint, including US nuclear decommissioning National Waste Project (NWP)
and the ITER fusion project.
PSRE Division - Energy, safety and security
PSRE had another very solid year, albeit somewhat impacted by the supply chain
disruptions and order delays seen elsewhere in the Group.
Booth has made a full recovery and has a record order book, including the HS2
£36m contract awarded in the prior year. Booth also completed its factory
extension, with production there now in full swing. We have successfully
rebuilt Booth into a leader in its high integrity doors market niches, both in
the UK and now commencing internationally. We are also making good progress in
building an aftermarket business at Booth, where we see good growth potential.
Metalcraft's progress with the Sellafield 3M3 boxes was good, with the initial
phase of the program now complete. In the period, Sellafield confirmed our
transition to phase two of the box contract. The contract value was also
boosted to £70m (previously £50m) with circa 1000 boxes to be delivered over
the next six years. Metalcraft is the only supplier to transition to phase two
of the contract. Frustratingly, the next 3M3 box contract tender remains on
the horizon, with uncertain timing, but we are very well placed to pursue this
contract and it does not impact on our forecasts, which allow for customer
delays. Metalcraft China completed its exit from MRI third party component
manufacture and reintegrated with its sister business in the UK.
Ormandy's results in the HVAC market were not as good as we would have liked,
but the business again turned in a reasonable profit in difficult market
conditions, which was a creditable achievement. The order book also remains
stable.
Our Fluid Handling business in Scotland maintained its consistency, with
another good performance in the period. During the year we completed the
bolt-on acquisition of Transkem, an industrial mixers business, which was
based in Glasgow. This product line complements our other fluid handling
activities, and the two businesses are now fully merged on the East Kilbride
site, with the Transkem building being sold in the second half of the period.
Composite Products had a steady year, with stable deliveries to Rapiscan for
package scanning equipment and the on-going development of other customers,
such as Prodrive.
MII - Medical Division
MII has successfully pivoted away from the custom business previously targeted
by Scientific Magnetics (SM) and is continuing to work towards new products in
Magnetic Resonance Imaging (MRI), driven by the acquisition of a majority
stake in Magnetica (MNA) in January 2021. With MNA, SM and Tecmag now all
integrated as one business, the focus is fully on niche-MRI systems. We are
making good progress on this exciting project, with the first orthopaedic
product expected to be launched in 2023. MNA (via Tecmag in Houston) will
continue to work on products for the adjunct Nuclear Magnetic Resonance (NMR)
market, including service and support offerings with our third-party partners.
In parallel with our pivot to MRI systems, Metalcraft's UK and China business
for MRI components has now been exited successfully.
During the period, we completed an investment in Adaptix (Oxford, UK) worth
£4m in total, being a 11.9% stake in the business. Adaptix is an emerging
medtech business, focused on the development of disruptive 3D X-ray equipment,
for a variety of applications, including veterinary and orthopaedic markets.
The plans of Adaptix and Magnetica are convergent, and we are seeking to
exploit this parallel track, to optimise costs in both businesses and to
improve market penetration. In the period, Adaptix began to place first
products in the veterinary imaging market and, post period end, submitted its
510(k) FDA application for its product for the orthopaedic market in the USA.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators to monitor the
business, as set out below (all items are "from continuing operations", after
restating for discontinued Peter Brotherhood in FY21).
Revenue: 1.9% increase - underlying organic growth continues
Overall Group continuing revenue increased to £100.4m (2021: £98.5m), driven
largely by organic growth in the EPM and PSRE divisions, offset by the planned
and executed exit of 3(rd) party MRI components in the Medical division.
Profit margin: Another improvement in results, despite global disruption
Adjusted EBITDA (note 2) increased slightly, to £12.7m (2021: £12.5m). PSRE
was boosted by strong results across the division, with robust results at
Booth. The profit margins in the EPM division also continued to improve, as
market conditions stabilised somewhat, following previous adverse Covid 19
effects. Medical losses widened, as expected, with the exit of MRI component
manufacture and the increased investment in Magnetica.
Operating profit was £7.2m (2021: £6.1m), in line with the EBITDA
improvement seen above, and lower exceptional costs.
Gross margin: Continued strong progress.
Group gross margin improved to 34.0% (2021: 30.4%) with ongoing improving
gross margin mix from the former HTG business units and further recovery at
Booth, due to our transformation programme.
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
rebate in FY22 (note 3) kept the charge lower than expected and the use of
brought forward losses in the UK. The tax position will be aided further in
the coming years by utilisation of losses in the UK and China. We continue to
be cautious, not recognising all of the potential trading tax losses in the
UK.
Adjusted diluted Earnings per Share (EPS) sustained
Adjusted diluted earnings per share from continuing operations (note 4)
reduced slightly to 21.8p (2021: 22.4p) reflecting the underlying growth in
results, offset by a higher tax charge (FY21 had a lower overall tax charge
following the use of US tax losses). Adjusted diluted earnings per share
attributable to Shareholders was 21.8p (2021: 96.2p), FY21 included 73.9p from
the disposal of PB and discontinued operations.
Basic and diluted earnings per share attributable to Shareholders from
continuing activities increased to 18.9p (2021: 15.9p) and to 18.3p (2021:
15.6p).
Funding and Liquidity: Ongoing strong net cash position
Net cash (including IFRS16 debt) at 31 May 2022 was £13.3m, excluding IFRS16
debt net cash was £16.7m (31 May 2021: Net cash (including IFRS16 debt)
£20.3m, excluding IFRS16 debt was £23.3m). The cash flows generated from the
strong underlying profits were subdued by a £8.2m working capital outflow,
mainly due to the delayed timing of various contracts but also the envisaged
further working capital outflow for the ES and Booth acquisitions, resulting
in an operating cash inflow of £3.7m for the year (2021: £6.4m). In addition
to £4.0m invested in Adaptix, £2.0m was invested in development costs
primarily in relation to Magnetica's compact helium-free MRI system and £3.0m
into property plant and equipment, (Booth extension £0.5m, £1.1m lease
renewals at Ormandy and Sci-Mag, HTI lathe £0.2m) with the Group still in a
strong net cash position. The Directors consider that the Group has sufficient
financial resources to deliver strategy, so the Group is actively looking for
further value enhancing opportunities.
Dividend: Progressive dividend fully reinstated
The Board reinstated a full year dividend in FY21 and has now reinstated half
year and full year dividends in FY22. A final dividend of 2.6p per share is
proposed, making a total dividend of 4.2p per share (2021: 4.0p). The dividend
will be paid on 9 December 2022, to shareholders on the register at 28 October
2022.
People
At Board level, Jo Reedman joined the Board on 1st March 2022, as an
independent non-executive director. As a former Capital Goods City analyst, Jo
brings a wealth of knowledge in many of our key markets and experience to
Avingtrans and we warmly welcome her to the Board. There were no other changes
at Board level. However, at divisional management level, we have seen some
increased staff turnover, since the pandemic has caused many people to
reassess their lives and careers. As a result, we have new leaders at HT Inc -
Drew van Norman and at Energy Steel - Marcus Alexander. Pleasingly, both Drew
and Marcus are internal promotions. We also have a new leader at Tecmag, with
Carl Glass joining the business in the period. After the acquisition of
Transkem, Paul Noble retired and Stuart Gibson took over as leader of the
combined business. We wish all of our new leaders well in their roles and our
thanks and best wishes go to Paul for a long and happy retirement.
In addition, the next tier management teams in each of the three divisions
continue to be strengthened, with a number of key appointments being made in
the year, notably in Medical, which is growing quite quickly. Skills
availability is always a challenge, the more so after Brexit, the effects of
Covid-19. However, we do not expect to be unduly constrained by shortages,
although the global economic situation is causing wage inflation across the
Group and making recruitment more difficult. We continue to invest significant
effort in developing skills in-house, through structured apprenticeship
programmes and graduate development plans. The construction of the apprentice
training school, based at Metalcraft, is complete and we have partnered with
West Suffolk College (WSC) to be the operator and training provider at the
centre. The Group continues to be recognised nationally for the strength of
its apprenticeship training schemes.
Environmental, Social and Governance (ESG) Report
Avingtrans believe that operating in a safe, ethical and responsible manner is
at the heart of creating sustainable value for all our stakeholders.
Our goal is to embed sustainability into our pinpoint-invest-exit business
strategy. In 2021, we reassessed our approach to sustainability, with a view
of integrating a sustainability strategy into our core business activities,
aligning ourselves with the UN's Sustainable Development Goals (SDGs).
The SDGs set out the UN agenda for people, planet and prosperity and aim to
achieve a prosperous, inclusive and sustainable society for all by 2030.
The SDGs provide all businesses with a new lens through which to translate the
world's needs and ambitions into business solutions. These solutions will
enable companies to better manage their risks, anticipate consumer demand,
build positions in growth markets, secure access to resources, and strengthen
their supply chains, while moving the world towards a sustainable and
inclusive development path.
We have reviewed the SDGs alongside our operations and consider the following
to be our priorities:
· Health, safety, and wellbeing
· Operational eco-efficiency
· Development of new technologies
Environmental
The Group's environmental policy is to ensure that we understand and
effectively manage the actual and potential environmental impact of our
activities. Our operations are conducted such that we comply with all legal
requirements relating to the environment in all areas where we carry out our
business.
During the year there have been no instances (2021: none) of non-compliance
with environmental laws and regulations. The Group has not incurred any fines
or penalties, nor been investigated for any significant breach of
Environmental laws and regulations.
Statement of carbon emissions -compliance with Streamlined Energy and Carbon
Reporting (SECR)
The Group has elected to voluntarily disclose the carbon reporting emissions
under the SECR regime, to provide stakeholders with a clear understanding of
the group's position with regards to carbon emissions. In the prior year, we
captured energy use across our UK sites and in the current reporting period,
we have rolled this out globally.
The Avingtrans business model is Pinpoint, Invest, Exit, with businesses
typically sold within a three to five year time frame, allowing for global
market conditions. As a result of our business model, we expect to see
significant fluctuation in energy use each year. Our focus is very much at a
site level, driving each site to set a target to improve efficiency and reduce
emissions.
The Group applies a location-based approach, where each site tracks energy
usage and fuel consumption. These are then converted into energy usage (kWh)
and carbon emissions (tCO2e), using relevant conversion factors. 2021 and 2022
emission conversion factors are published by the Department for Environment,
Food and Rural Affairs and the Department for Business, Energy &
Industrial Strategy.
The data in the tables below is drawn from our 7 locations in the UK and 7
locations overseas. Carbon reporting is aligned to our financial statements,
consequently we have excluded the results from our discontinued operations.
The following highlights Avingtrans' emissions and intensity ratios:
2022 2021
United Kingdom Overseas Group United Kingdom
Scope 1:
Gas 737 238 975 714
Oil 605 - 605 471
Distribution 14 4 18 103
Company vehicle travel 12 18 30 3
1,368 260 1,628 1,291
Scope 2 - Purchased electricity 737 368 1,105 1,119
Total emissions tCO(2)e 2,105 628 2,733 2,410
Total energy consumption mWh 9,673 2,105 11,778 11,271
Intensity metrics:
Employees - UK sites 445 265 710 423
Emissions tCO(2)e per employee 4.7 2.4 3.8 5.7
Revenue (£m) - UK sites 57.2 43.2 100.4 60.0
Emissions tCO(2)e per £m of revenue 36.8 14.5 27.2 40.2
The inclusion of overseas entities significantly decreases the Group's carbon
intensity. This is partly driven by their focus on aftermarket revenues, which
are less energy intensive, compared with original equipment revenues.
Furthermore, our largest overseas manufacturing facility is based in Vermont,
a state which generates nearly 100% of its electrical power from renewables.
Consequently, carbon emissions from electricity usage are very minor.
The Group has seen a significant fall in tCO2e £m of revenue for its UK sites
in 2022. The decrease is primarily driven by the FY21 discontinuation of
component supply for Siemens MRI, which required the use of energy intensive
stress relieving ovens in the manufacturing process. Furthermore, investment
in operational eco-efficiency, particularly LED lighting, has driven
improvements.
Carbon and energy reduction targets have been established at a site level.
Most sites have established targets and strategies as part of their ISO 14001
Environmental Management System accreditation. Our Booth subsidiary is leading
the way, with a commitment to achieving net zero by the end of calendar year
2023. This will be achieved through choosing low emission electricity
providers, investment to improve operational efficiency, and a carbon
offsetting programme.
Operational eco-efficiency
Operational eco-efficiency plays a key role in our business. It supports our
plan to maximise profitability, strengthen our competitive position, and
provide customers with the highest quality of services. Our efforts to reduce
energy use and prevent pollution also support our commitment to our employees,
the environment, and the communities in which we operate.
Green manufacturing facility
During the year, our subsidiary, Booth, opened its new factory wing, which
promises to help deliver a more flexible and greener manufacturing facility.
Designed to meet a CO2 emission rate of 38.2kg/CO2/m2, the new facility uses a
variety of thermal, lighting and energy saving advances, to improve the energy
efficiency of the building and limit CO(2) emissions. Circa 95% of the
demolition materials removed, following the removal of the pre-existing
building, were recycled, with the remaining five per cent consisting of
asbestos-containing materials, which were disposed of safely.
Development of new technologies
Small Modular Reactors
Small Modular Reactors ("SMRs") are advanced power plants, which can be
largely built in factories as modules, to minimise costly on-site
construction, allowing manufacturers to reduce costs, by producing many
identical units. More than 70 designs of small modular reactor are in
development in 18 countries around the world, mostly based on "Generation
III+" reactor technologies, which are relatively close to commercial
readiness.
The UK arm of our Hayward Tyler business is collaborating with the Nuclear
Advanced Manufacturing Research Centre, to develop new designs of reactor
coolant pumps (RCPs) for small modular reactors (SMRs) and help the UK supply
chain prepare to produce critical components for the global SMR market.
Next generation nuclear power: Molten Chloride Fast Reactor
Our US Hayward Tyler business has developed high-temperature molten salt
pumps, destined for a state-of-the-art Integrated Effects Test (IET) facility,
under development by Southern Company and TerraPower, to advance development
of the Molten Chloride Fast Reactor (MCFR). This is a transformational,
fourth-generation, molten salt nuclear technology, designed to enable
low-cost, economywide decarbonization. Located at TerraPower's Everett,
Washington facility, the IET is a non-nuclear, externally heated multi-loop
system, intended to test and validate integrated operation of MCFR systems, as
well as demonstrate multiple auxiliary MCFR functions.
From fission to fusion
The International Thermonuclear Experiment Reactor ("ITER") is currently under
construction in France. It will be used as a global demonstrator of fusion
technologies, in the lead up to eventual full-scale fusion power plants. Like
nuclear fission, fusion is free of carbon emissions (except for construction),
but also has the benefit of a much smaller and less hazardous waste stream.
Hayward Tyler in the USA is working with the US government, to design and
produce specialist pumps for ITER, as part of the US contribution to the
project.
Nuclear waste remediation
At the end of FY21, our Metalcraft business, secured the next phase of its
contract with Sellafield, to manufacture 1,000 3m(3) boxes. The boxes will be
used to store intermediate level waste retrieved from silos at legacy
locations in Cumbria. In environmental terms, this storage project represents
one of the most positive and important intergenerational equity deliverables
of the next few decades, developing and implementing critical technology, to
bequeath a pristine environment to posterity.
Building on our FY21 success, our Energy Steel business secured a contract in
FY22, to supply materials and subassemblies required for the Nuclear Waste
Partnership LLC's waste isolation pilot plant in New Mexico, the nation's only
deep geological long-lived radioactive waste repository.
Renewables: Concentrated Solar Power
Hayward Tyler in China supplied a glandless pump package to a major Chinese
EPC, Shanghai Electric Corporation, for installation at Bin Rashid Al Maktoum
Solar Park Phase IV. This is a 950MW Concentrated Solar Power and Photovoltaic
hybrid power plant. The project makes use of three different technologies to
generate clean energy, consisting of 600MW from a parabolic basin complex,
100MW from a solar tower, and 250MW from PV panels.
It is the world's largest project using Concentrated Solar Power on a single
location. The Dubai solar park is an important project supporting the Dubai
Clean Energy Strategy, which aims to increase Dubai's use of clean energy to
75% of their total energy mix by 2050.
Magnetic Resonance Imaging ("MRI"): Going helium-free
Existing MRI systems rely on liquid helium, to cool the superconducting
magnets at the heart of each system. Helium is a scarce, non-renewable
resource, mostly obtained as a by-product of oil extraction. Therefore, in our
new compact MRI designs, we are seeking to take advantage of the smaller
system footprint, to enable us to rely on mechanical cooling only, thus
eliminating use of helium in these systems.
Cleaning up the oceans
Most subsea motors utilise glycols as a control fluid, lubricating and
protecting equipment from degradation in a wide range of temperatures and
pressures on the ocean floor. Discharges of glycols can be extremely damaging
to undersea ecosystems. Recently, new greener glycols have been developed
which pose a significantly reduced risk to the marine environment. During
FY22, our Hayward Tyler business have been testing the suitability of the
greener glycols with results indicating the fluid is compatible with our
product. In FY23, the greener glycols will be sold in our products as default.
Social
Social Responsibility
It is paramount that the Group maintains the highest ethical and professional
standards across all of its activities and that social responsibility should
be embedded in operations and decision making. We understand the importance of
managing the impact that the business can have on employees, customers,
suppliers and other stakeholders. The impact is regularly reviewed to sustain
improvements, which in turn support the long-term performance of the business.
Our focus is to embed the management of these areas into our business
operations, both managing risk and delivering opportunities that can have a
positive influence on our business.
Employees
The Group places considerable value on the involvement of its employees and
has continued to keep them informed on matters affecting them directly and on
financial and broader economic factors affecting the Group. The Group
regularly reviews its employment policies. The Group is committed to a global
policy of equality, providing a working environment that maintains a culture
of respect and reflects the diversity of our employees. We are committed to
offering equal opportunities to all people regardless of their gender,
nationality, ethnicity, language, age, status, sexual orientation, religion or
disability. We believe that employees should be able to work safely in a
healthy workplace, without fear of any form of discrimination, bullying or
harassment. We have been rolling-out a "dignity and respect" training program
across the Group. We believe that the Group should demonstrate a fair gender
mix across all levels of our business, whilst recognising that the
demographics of precision engineering and manufacturing remain predominantly
male, which is, to an extent, beyond our control.
Apprenticeships and training
All larger group locations are running apprenticeship schemes for young
people, both to act as socially responsible employers and to optimise the
demographics of our workforce over the mid to long term.
During the year, we completed construction of an apprentice training school,
based at Metalcraft, Chatteris. We have partnered with West Suffolk College
(WSC) to be the operator and training provider at the centre, which will take
on between 80 and 130 students each year. Construction of the centre has been
funded through a £3.16 million grant from Cambridgeshire and Peterborough
Combined Authority.
The Group continues to be recognised nationally for the strength of its
apprenticeship training schemes. During the year our Metalcraft business
collected a national finalist certificate for the outstanding contribution to
the development of apprenticeships.
Health, safety, and wellbeing
The Group takes H&S matters and its related responsibilities very
seriously.
As regular acquirers of businesses, we find different levels of capability and
knowledge in different situations. Often, a key investment need in smaller
acquisitions is to spread H&S best practice from other Group businesses
and bring local processes up to required standards. Larger acquisitions (such
as HTG previously) usually have well developed H&S processes and we seek
to learn from these in other business units.
Employee equality, welfare and engagement are critical for developing our key
asset. We focus on pro-active actions, including, internal training,
certifications, and employee engagement through listening, survey and
involvement.
Covid-19 has been the biggest health and safety issue for the Group this year.
Fortunately, the nature of our products and the topography of our factories
have given us a good base to work from, to make our workplaces Covid-19 safe.
We have an overall set of guidelines to work to, derived from government
policies around the world and local teams in each business adapt these to the
specifics of their individual site. These measures include:
· Shielding of vulnerable employees
· Working from home where feasible
· Factory and office re-layouts to facilitate social-distancing
· Enhanced cleaning and site hygiene
· Additional use of PPE equipment where necessary
· Minimisation and careful management of third-party visitors to
our sites
Where our employees have to visit other third-party sites, they have protocols
from their business unit to follow and must also adhere to the policies and
procedures of the site which they are visiting. Each business has a team
responsible for ensuring that the Covid-19 plan is kept up to date and
adapted, if required, as the circumstances of the pandemic continue to evolve.
Taken as a whole, these measures have allowed us to operate at a consistently
high level of effectiveness throughout the pandemic and ensured that we have
minimised any loss of output, whilst keeping all employees safe.
Our Health and Safety KPIs can be found in the key performance indices section
of the strategic report (page 8). Somewhat disappointingly, incidents per
employee per annum have remained flat in the current year, despite several
initiatives. At Board level, Les Thomas has H&S oversight and he conducts
inspections with local management, as appropriate.
During the year there have been no fatalities or serious injuries at any of
our sites.
Ethical policy
The Group complies with the Bribery Act 2010. We do not tolerate bribery,
corruption or other unethical behaviour on the part of any of our businesses
or business partners in any part of the world. Employee training has been
completed in all areas of the business to ensure that the Act is complied
with.
Outlook
Avingtrans is a niche engineering market leader, principally in the Energy and
Medical and Industrial sectors, with a successful profitable growth record,
underpinned by our 'PIE' strategy. Recent acquisitions will provide further
opportunities for the Group to build enduring value for investors in resilient
market niches. We will continue to be frugal and seek to crystallise value and
return capital when the timing is right, as part of the PIE strategy
implementation. Our PIE strategy has served us well in the current crisis and
could result in further opportunities to grow shareholder value.
The Group continues to invest in its three divisions, with a focus on the
global energy and medical markets, to position them for maximum shareholder
value via eventual exits in the years to come. Magnetica's MRI product
development is proceeding to plan, with an expected launch of the orthopaedic
product later in 2023, subject to FDA approval in the USA. This activity is
now complemented by the complementary investment in Adaptix. The previous
acquisitions of Booth and Energy Steel continued to recover well, as
demonstrated by the results in the period. The Group is in a strong net cash
position, so we are proactively pursuing potential PIE prospects, with the
ability to capitalise on any suitable strategic opportunities. Our value
creation targets continue to be accomplished as planned and are underpinned by
a conservative approach to debt.
The energy divisions have a strong emphasis on the thermal power, nuclear and
hydrocarbon markets and aftermarkets. The medical division has pivoted to
focus on compact, helium-free MRI systems, which the Board believes could
create significant future shareholder value. To drive profitability and market
engagement, each division has a clear strategy to support end-user aftermarket
operations, servicing its own equipment and (where pertinent) that of third
parties, to capitalise on the continued market demand for efficient, reliable
and safe facilities.
The Russia-Ukraine conflict and resulting inflationary effects on the global
economy is now our biggest uncertainty. However, we have taken effective cost
and risk mitigation actions so far, to limit any potential downside and we
will continue to be on our guard.
Despite the current global macroeconomic environment, our markets continue to
develop and M&A opportunities remain a priority for us. Businesses like
ours can command high valuations at the point of exit, as demonstrated by the
disposal of Peter Brotherhood in FY21. The Board remains cautiously confident
about the current strategic direction and potential future opportunities
across our markets. We will continue to refine our business by pinpointing
specific additional acquisitions as the opportunities arise, to create
superior shareholder value, whilst maintaining a prudent level of financial
headroom, to enable us to endure any subsequent headwinds.
The Strategic Report was approved by the Board and signed on its behalf by:
Roger McDowell
Steve
McQuillan
Stephen King
Chairman
Chief Executive Officer
Chief Financial Officer
27 September
2022 27
September
2022 27
September 2022
Consolidated Income Statement Note 2022 2021
£'000 £'000
Revenue 1 100,405 98,516
Cost of sales (66,261) (68,586)
34,144 29,930
Gross profit
Distribution costs (3,653) (3,024)
Administrative expenses (23,242) (20,821)
Operating profit before amortisation of acquired intangibles, other 8,558 8,188
non-underlying items and exceptional items
Amortisation of acquired intangibles 2 (869) (1,008)
Share based payment 2 (188) (133)
Acquisition costs 2 (29) (234)
Restructuring costs (93) (771)
Other exceptional items (130) 43
Operating profit 1 7,249 6,085
Finance income 2 176 73
Finance costs 2 (393) (711)
7,032 5,447
Profit before taxation
Taxation 3 (971) (383)
Profit after taxation from continuing operations 6,061 5,064
Profit after taxation from discontinued operations - 22,136
Profit for the financial year 6,061 27,200
Profit is attributable to:
Owners of Avingtrans PLC 6,478 27,366
Non-controlling interest (417) (166)
Total 6,061 27,200
Earnings per share:
From continuing operations
- Basic 4 18.9p 15.9p
-Diluted 4 18.3p 15.6p
From continuing and discontinuing operations
-Basic 4 18.9p 85.4p
-Diluted 4 18.3p 83.6p
Consolidated Statement of Comprehensive Income
2022 2021
£'000 £'000
Profit for the year 6,061 27,200
Items that will not subsequently be reclassified to profit or loss
Remeasurement of defined benefit liability 95 (662)
Income tax relating to items not reclassified (24) 49
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations 1,445 (1,162)
7,577 25,425
Total comprehensive income for the year attributable to equity shareholders
Consolidated Balance Sheet 2022 2021
at 31 May 2022
£'000 £'000
Non current assets
Goodwill 21,420 21,222
Other intangible assets 15,675 14,464
Property, plant and equipment 25,239 25,281
Deferred tax 1,544 1,767
Unlisted Investments 4,000 -
Pension and other employee obligations 1,688 1,284
69,566 64,018
Current assets
Inventories 11,759 10,076
Trade and other receivables: falling due within one year 46,817 36,010
Trade and other receivables: falling due after one year 1,579 1,798
Current tax asset 686 633
Cash and cash equivalents 24,287 30,078
85,128 78,595
Total assets 154,694 142,613
Current liabilities
Trade and other payables (29,629) (26,587)
Lease liabilities (1,605) (1,310)
Borrowings (5,497) (2,160)
Current tax liabilities (710) (672)
Provisions (1,770) (1,742)
Derivatives - (144)
Total current liabilities (39,211) (32,615)
Non-current liabilities
Borrowings (762) (3,368)
Lease liabilities (3,097) (2,965)
Deferred tax (4,465) (3,456)
Other creditors (1,342) (1,246)
Total non-current liabilities (9,666) (11,035)
Total liabilities (48,877) (43,650)
Net assets 105,817 98,963
Equity
Share capital 1,607 1,599
Share premium account 15,693 15,347
Capital redemption reserve 1,299 1,299
Translation reserve 825 (732)
Merger reserve 28,949 28,949
Other reserves 1,457 1,457
Investment in own shares (4,235) (4,235)
Retained earnings 58,223 53,614
Total equity attributable to equity holders of the parent 103,818 97,298
Non-controlling interest 1,999 1,665
Total equity 105,817 98,963
Consolidated Statement of Changes in Equity
at 31 May 2022
Share Share Capital Merger Trans- Other Invest-ment in own shares Retained earnings 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 2020 1,588 14,970 1,299 28,949 430 180 (4,235) 26,727 69,908 - 69,908
Ordinary shares issued 11 377 - - - - - - 388 - 388
Magnetica acquisition - - - - - - - - - 1,831 1,831
Gain on disposal of non-controlling interest in subsidiary - - - - - 1,278 - - 1,278 - 1,278
Share-based payments - - - - - - - 133 133 - 133
Total transactions with owners 11 377 - - - 1,278 - 133 1,799 1,831 3,630
Profit for the year - - - - - - - 27,366 27,366 (166) 27,200
Other comprehensive income
Actuarial gain for the year on pension scheme - - - - - - - (662) (662) (662)
-
Deferred tax on actuarial movement on pension scheme - - - - - - - 49 49
- 49
Exchange loss - - - - (1,162) - - - (1,162) - (1,162)
Total comprehensive income for the year - - - - (1,162) - - 26,753 25,591 25,425
(166)
Balance at 1,599 15,347 1,299 28,949 (732) 1,457 (4,235) 53,614 97,298 1,665 98,963
31 May 2021
Consolidated statement of changes in equity (continued)
at 31 May 2022
Share Share Capital Merger Trans- Other Invest-ment in own shares Retained Total
capital premium redemp- reserve lation reserves earnings 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) 1,457 (4,235) 1,665 98,963
53,614 97,298
Ordinary shares issued 8 346 - - - - - - 354 - 354
Dividends paid - - - - - - - (1,265) (1,265) - (1,265)
Share-based payments - - - - - - - - 188
188 188
Total transactions with owners 8 346 - - - - - - (723)
(1,077) (723)
Profit for the year - - - - - - - 6,478 6,478 (417) 6,061
Investment in subsidiary with non-controlling interest - - - - 112 - - 751 -
(863) (751)
Other comprehensive income
Actuarial gain for the year on pension scheme - - - - - - - 95 95 - 95
Deferred tax on actuarial movement on pension scheme - - - - - - (24) (24) - (24)
Exchange gain - - - - 1,445 - - - 1,445 - 1,445
Total comprehensive income for the year - - - - 1,557 - - 5,686 7,243 334 7,577
Balance at 1,607 15,693 1,299 28,949 825 1,457 (4,235) 58,223 103,818 1,999 105,817
31 May 2022
Consolidated Cash Flow Statement Note
for the year ended 31 May 2022
2022 2021
£'000 £'000
Operating activities
Cash flows from operating activities 5 4,173 6,877
Finance costs paid (388) (723)
Income tax received 203 491
Contributions to defined benefit plan (282) (272)
Net cash inflow from operating activities 3,706 6,373
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 6 (582) 341
Investment in unlisted undertaking (4,000) 26,636
Finance income 176 73
Purchase of intangible assets (1,996) (884)
Purchase of property, plant and equipment (2,989) (1,532)
Proceeds from sale of property, plant and equipment 44 -
Net cash (used in)/generated from investing activities (9,347) 24,634
Financing activities
Equity dividends paid (1,265) -
Repayments of bank loans (468) (4,397)
Repayment of leases (1,486) (1,993)
Proceeds from issue of ordinary shares 355 388
Proceeds from borrowings 2,493 149
Net cash outflow from financing activities (371) (5,853)
Net (decrease)/increase in cash and cash equivalents (6,012) 25,154
Cash and cash equivalents at beginning of year 29,736 4,693
Effect of foreign exchange rate changes on cash 178 (111)
Cash and cash equivalents at end of year 23,902 29,736
1 Segmental analysis
Year ended 31 May 2022 Energy Energy Medical Unallocated Total
EPM PSRE MII central items
£'000 £'000 £'000 £'000 £'000
Original Equipment 14,089 41,738 2,426 - 58,253
After Market 39,115 3,006 31 - 42,152
Revenue 53,204 44,744 2,457 - 100,405
Operating profit/(loss) 4,592 5,020 (1,291) (1,072) 7,249
Net finance income/(expense) (253) 64 (23) (5) (217)
Taxation credit/(charge) (739) (761) 149 380 (971)
Profit/(loss) after tax from continuing operations 3,600 4,323 (1,165) (697) 6,061
Segment non-current assets 43,671 14,317 7,578 4,000 69,566
Segment current assets 42,849 21,960 1,828 18,491 85,128
86,520 36,277 9,406 22,491 154,694
Segment liabilities (23,567) (19,069) (3,539) (2,702) (48,877)
Net assets 62,953 17,208 5,867 19,789 105,817
Non-current asset additions
Intangible assets 234 413 1,615 - 2,262
Tangible assets 962 1,429 598 - 2,989
1,196 1,842 2,213 - 5,251
Other income statement items:
Depreciation and amortisation (2,492) (1,321) (367) - (4,180)
Unallocated assets/ (liabilities) consist primarily of interest-bearing assets
and liabilities and income tax assets and liabilities.
Segmental analysis has been revised for FY21 following the segment move from
Medical to PSRE for the non-Magnetica companies - Composite Products and
Stainless Metalcraft China.
Year ended 31 May 2021 Energy Energy Medical Unallocated Total
EPM PSRE MII central items
£'000 £'000 £'000 £'000 £'000
,Original Equipment 15,427 36,674 5,635 - 57,736
After Market 35,956 4,629 195 - 40,780
Revenue 51,383 41,303 5,830 - 98,516
Operating profit/(loss) 2,833 4,234 (224) (758) 6,085
Net finance income/(expense) (390) (218) (21) (9) (638)
Taxation credit/(charge) 191 (651) 1 76 (383)
Profit/ (loss) after tax from continuing operations 2,634 3,365 (244) (691) 5,064
Segment non-current assets 44,164 13,259 6,595 - 64,018
Segment current assets 34,940 17,225 1,531 24,899 78,595
79,104 30,484 8,126 24,899 142,613
Segment liabilities (9,381) (13,801) (5,386) (15,082) (43,650)
Net assets 69,723 16,683 2,740 9,817 98,963
Non-current asset additions
Intangible assets 75 318 3,610 - 4,003
Tangible assets 1,544 741 27 - 2,312
1,619 1,059 3,637 - 6,315
Other income statement items:
Depreciation and amortisation (2,409) (1,449) (458) - (4,316)
1 Segmental analysis (continued)
Geographical
The following tables provides an analysis of the Group's revenue by
destination and the location of non-current assets (excluding deferred tax
assets and defined benefit pension surplus) by geographical market:
2022 2021 2022 2021
Revenue Non-current Non-current
Revenue Assets Assets
£'000 £'000 £'000 £'000
United Kingdom 45,144 43,594 31,498 27,485
Europe (excl. UK) 6,695 8,407 - -
United States of America 23,383 18,619 27,933 27,544
Africa & Middle East 1,633 2,137 - -
Americas & Caribbean (excl. USA) 3,767 3,523 - -
China 10,387 11,137 1,771 2,059
Asia Pacific (excl. China) 9,396 10,606 5,132 3,879
Antarctica - 493 - -
100,405 98,516 66,334 60,967
2 Adjusted Earnings before interest, tax, depreciation and
amortisation
2022 2021
£'000 £'000
Profit before tax from continuing operations 7,032 5,447
Share based payment expense 188 133
Acquisition costs 29 234
Restructuring costs 93 771
Other exceptionals 130 (43)
(Gain)/loss on derivatives (144) 109
Amortisation of intangibles from business combinations 869 1,008
Adjusted profit before tax from continuing operations 8,197 7,659
Finance income (176) (73)
Finance cost 393 711
Gain/(loss) on derivatives 144 (109)
Adjusted profit before interest, tax and amortisation from business 8,558 8,188
combinations ('EBITA')
Depreciation 3,675 3,461
Amortisation of other intangible assets 374 545
Amortisation of contract assets 132 310
Adjusted Earnings before interest, tax, depreciation and amortisation 12,739 12,504
('EBITDA') from continuing operations
The Directors believe that the above adjusted earnings are a more appropriate
reflection of the Group performance.
All costs noted above, apart from the share based payment expense and
amortisation of intangibles had a reduction in the cashflow in the year. The
tax impact on the above costs is relatively immaterial.
3 Taxation
2022` 2021
£'000 £'000
Continuing operations
Current tax
Corporation tax - current year - 6
Corporation tax - prior year 141 43
Overseas tax - current year 225 -
Overseas tax - prior year (480) 738
Total current tax (114) 787
Deferred tax
Deferred tax - current year 860 (241)
Deferred tax - prior year 170 (298)
Deferred tax - rate 55 135
Total deferred tax 1,085 (404)
Tax charge on continuing operations 971 383
Tax (credit)/charge on discontinued operations - (746)
Total tax (credit)/charge in the year 971 (363)
Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable
profit/loss for the year. Taxation for other jurisdictions is calculated at
the rates prevailing in the respective jurisdictions.
On 3 March 2021, the Chancellor of the Exchequer announced that the
corporation tax rate would increase to a maximum of 25% from 1 April 2023.
This was substantively enacted on 24 May 2021. Deferred tax is calculated at
the tax rates that are expected to apply in the period when the liability is
settled, or the asset is realised, based on tax law and the corporation tax
rates that have been enacted, or substantively enacted, at the balance sheet
date. As such, the deferred tax rate applicable at 31 May 2022 is 25% and
deferred tax has been re-measured at this rate. The recent budget on 23
September 2022, the Chancellor of the Exchequer announced that the corporation
tax rate would not increase to a maximum of 25% however this not been enacted
as at year end.
4 Earnings per ordinary share
Basic and diluted earnings per share have been calculated in accordance with
IAS 33 which requires that earnings should be based on the net profit or loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares in issue during the year.
For diluted earnings per share the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares,
being the CSOP and ExSOP share options.
2022 2021
Number Number
Weighted average number of shares - basic 32,070,325 31,855,908
Share option adjustment 1,063,674 670,102
Weighted average number of shares - diluted 33,133,999 32,526,010
2022 2021
£'000 £'000
Profit from continuing operations 6,061 5,064
Share based payment expense 188 133
Acquisition costs 29 234
Restructuring costs 93 771
Other exceptionals 130 (43)
(Gain)/loss on derivatives (144) 109
Amortisation of intangibles from business combinations 869 1,008
Adjusted profit after tax from continuing operations 7,226 7,276
From continuing operations:
Basic earnings per share 18.9p 15.9p
Adjusted basic earnings per share 22.5p 22.8p
Diluted earnings per share 18.3p 15.6p
Adjusted diluted earnings per share 21.8p 22.4p
Earnings from discontinuing operations: - 24,028
From discontinuing operations
Basic earnings per share - 69.5p
Adjusted basic earnings per share - 75.4p
Diluted earnings per share - 68.1p
Adjusted diluted earnings per share - 73.9p
Earnings attributable to shareholders including non-controlling interest 7,226 31,303
Basic earnings per share 18.9p 85.4p
Adjusted basic earnings per share 22.5p 98.3p
Diluted earnings per share 18.3p 83.6p
Adjusted diluted earnings per share 21.8p 96.2p
The Directors believe that the above adjusted earnings per share calculation
for continuing operations is a more appropriate reflection of the Group's
underlying performance.
There are Nil share options at 31 May 2022 (2021: Nil) that are not included
within diluted earnings per share because they are anti-dilutive.
5 Notes to the consolidated cash flow statement
Cash flows from operating activities:
2022 2021
£'000 £'000
Continuing operations
Profit before income tax from continuing operations 7,032 5,447
Loss before income tax from discontinuing operations before disposal - (1,732)
Adjustments for:
Depreciation 3,675 3,461
Amortisation of intangible assets 374 545
Amortisation of intangibles from business combinations 869 1,008
Loss on disposal of property, plant and equipment 44 6
Finance income (176) (73)
Finance expenses 393 711
Share based payment charge 188 133
Changes in working capital
(Increase)/decrease in inventories (1,033) 1,468
Increase in trade and other receivables (7,837) (5,108)
Increase in trade and other payables 783 1,457
Increase/(decrease) in provisions 32 (457)
Other non cash changes (171) 11
Cash flows from operating activities 4,173 6,877
2022 2021
£'000 £'000
Cash and cash equivalents
Cash 24,287 30,078
Overdrafts (385) (342)
23,902 29,736
6 Acquisitions and disposals
Business combination - Transkem Plant Limited
On 1 December 2021, the Group acquired 100% of the shares in Transkem Plant
Limited ("Transkem") in exchange for consideration of £1,155,000.
Consideration comprises of cash on completion of £812,000 and deferred
consideration valued at £343,000.
Transkem are a United Kingdom based engineering company which specialises in
the design, manufacture and service mixers and agitators for customers
operating within pharmaceuticals, food & drink, and water treatment
industries.
The fair value of Transkem's net assets at the date of acquisition were as
follows:
£'000
Goodwill 156
Other intangible assets 223
Property, plant and equipment 56
Short term investments 57
Inventories 24
Trade and other receivables 399
Assets held for sale 232
Cash 230
Total assets 1,377
Trade and other payables (154)
Current tax liabilities (15)
Deferred tax liability (53)
Total liabilities (222)
Net assets 1,155
Consideration comprises:
Cash on completion 812
Contingent consideration 343
1,155
Assets held for sale represents a freehold property which was sold during the
period.
Contingent consideration is based on the business achieving profit targets
over the 2 year period to 30 November 2023, and has been discounted to fair
value using a discount rate of 10.8%.
The impact of the Transkem acquisition on the Consolidated income statement is
as follows:
2022
£'000
Revenue 178
Expenses (209)
Loss before tax (31)
Tax credit 9
Overall effect on the Consolidated Income Statement (22)
Since acquisition Transkem contributed the following to the Group's cash
flows:
2022
£'000
Net cash inflow from operating activities 493
Net cash used by investing activities -
Net cash inflow from financing activities -
7 Net cash and gearing
2022 2021
£'000 £'000
Cash 24,287 30,078
Overdrafts (385) (342)
Loans (5,874) (5,186)
Lease liability - finance leases under IAS17 (1,313) (1,210)
Net cash - excluding IFRS 16 16,715 23,340
Lease liability - under IFRS 16 (3,389) (3,065)
Net cash 13,326 20,275
105,817 98,963
Equity
12.6% 20.5%
Net cash to equity ratio
8 Preliminary statement and basis of preparation
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 27 September 2022. It is not the Group's statutory
accounts within the meaning of Section 434 of the Companies Act 2006.
The Financial information set out in this announcement does not constitute the
Company's Consolidated Financial Statements for the financial years ended 31
May 2022 or 31 May 2021 but are derived from those Financial Statements.
Statutory Financial Statements for 2021 have been delivered to the Registrar
of Companies and those for 2022 will be delivered following the Company's
AGM. The auditors Cooper Parry Group Limited have reported on the 2022
financial statements. Their report was unqualified, did not draw attention
to any matters by way of emphasis without qualifying their report and did not
contain statements under Section 498(2) or (3) of the Companies Act 2006 in
respect of the Financial Statements for 2022. The group's previous auditors,
Grant Thornton UK LLP reported on the 2021 financial statements. Similarly,
their report was unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain statements under
Section 498(2) or (3) of the Companies Act 2006 in respect of the Financial
Statements for 2021.
The Company's financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the UK and those parts of the Companies Act 2006 that
apply to companies reporting under IFRS. The principal accounting policies
adopted by the company, which remain unchanged, are set out in the statutory
financial statements for the year ended 31 May 2022.
9 Annual report and Accounts
The Report and Accounts for the year ended 31 May 2022 will be available on
the Group's website www.avingtrans.plc.uk on or around 10 October 2022.
Further copies will be available from the Avingtrans' registered office:
Chatteris Business Park, Chatteris, Cambridgeshire PE16 6SA.
10 Annual General Meeting
The Annual General Meeting of the Group will be held at Shakespeare Martineau
LLP, No1 Colmore Square, Birmingham, B4 6AA on 17 November 2022 at 11:00am.
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