REG - Avingtrans PLC - Preliminary results for the year ended 31 May 2023
27/09/2023 07:00
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RNS Number : 7430N Avingtrans PLC 27 September 2023
27 September 2023
Avingtrans Plc
("Avingtrans" or the "Group")
Preliminary results for the year ended 31 May 2023
Avingtrans PLC (AIM: AVG), which designs, manufactures and supplies critical
components, modules, systems and associated services to the energy, medical
and industrial sectors, is pleased to announce its preliminary results for the
year ended 31 May 2023.
Financial Highlights
· Revenue from continuing operations increased by 17.5% to £116.4m
(2022: £99.1m)
· Gross Margin reduced slightly to 32.9% (2022: 34.1%), driven by
changes in the OEM/AM mix
· Adjusted(1) EBITDA from continuing operations increased by 10.6%
to £13.7m (2022: £12.4m)
· Adjusted(1) PBT from continuing operations increased by 11.1% to
£9.0m (2022: £8.1m)
· Adjusted(1) Diluted earnings per share from continuing
operations increased by 8.3% to 23.4p (2022: 21.6p)
· Net Cash (excluding IFRS16) as at 31 May 2023 of £13.0m (31 May
2022: £16.7m) following investments in the Group
· Final Dividend 2.8p per share (2022: 2.6p) resulting in a total
dividend for the year of 4.5p (2022: 4.2p)
(1 )Adjusted to add back amortisation of intangibles from business
combinations, acquisition costs and exceptional items
Operational Highlights
Energy
· Revenue increased 16.8% to £112.8m (2022: £96.6m)
· Metalcraft contract to supply the Sellafield 3M3 boxes is
on-going in phase two of the programme
· Booth completed the HS2 door designs and will commence
manufacture in FY24
· Hayward Tyler and Energy Steel again won multiple nuclear bids,
including next generation enabling contracts
· Acquired HES/HEVAC for £0.9m 30 December 2022 and integrated
into the Ormandy Bradford site
· Post period end, completed the acquisition of Slack and Parr, a
manufacturer of specialist pumps and supplier of high-precision gear metering
pumps, hydraulic flow dividers and industrials pumps for a total consideration
of up to £4.9m
Medical
· Revenue increased 44% to £3.6m (2022: £2.5m)
· Compact helium-free MRI system making good progress - expected to
launch in Q4 calendar 2023, with US 510(K) approval to follow in H1 2024
· Post period end acquisition of remaining issued share capital of
3D X-ray leader, Adaptix, in Oxford, UK, for a total consideration of £8.1m
including absorbed and repaid debt.
· Adaptix has launched its veterinary product and was awarded its
510(K) to FDA in USA for orthopaedics
· Potentially significant market opportunities in the target
imaging markets for both businesses
Current Trading & Outlook
· In the quarter since 31 May 2023, the Group has performed in line
with management expectations with the momentum of FY23 continuing into FY24
· The Board remains confident about the current strategic direction
and potential future opportunities across our markets, though mindful of
market conditions
· We will continue to refine our business by pinpointing specific
additional acquisitions as the opportunities arise, to generate superior
shareholder value, whilst maintaining a prudent level of financial headroom.
Commenting on the results, Roger McDowell, Chairman, said:
"We are delighted to report a robust set of results. It has been a challenging
year in many ways however Avingtrans has again delivered and met market
expectations. We used our strong balance sheet wisely in the year and bought
HES/HEVAC, which is already successfully integrated with Ormandy. Post year
end, we acquired the assets of Slack and Parr, a specialist pump manufacturer
and also completed the acquisition of X-ray specialist Adaptix, as well as
further investing in Magnetica's novel MRI systems. We entered FY24 with a
healthy order book and we look forward to further progress across the Group
this year, with macro developments in the energy, infrastructure and medical
markets being tilted in our favour."
Enquiries:
Avingtrans plc 01354 692391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Broker) 02074 963000
Shaun Dobson, Alex Bond, Oliver Platts
IFC Advisory (Financial PR) 020 3934 6630
Graham Herring, Tim Metcalfe, Zach Cohen
About Avingtrans plc:
Avingtrans designs, manufactures and supplies original equipment, systems and
associated aftermarket services to the energy, medical and industrial markets
worldwide.
Business units
Hayward Tyler - Luton, East Kilbride & Nottingham, UK, USA, China and
India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Energy Steel, Inc - Rochester Hills, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising in: OEM
parts obsolescence; custom fabrications; engineering design solutions; product
refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK
Provider of safety-critical equipment for the energy, medical, science and
research communities, worldwide, specialising in precision pressure and vacuum
vessels and associated fabrications, sub-assemblies and systems.
Booth Industries - Bolton, UK
Designs, manufactures, installs and services doors and walls which can be
tailored to be: blast and explosion proof; fireproof; acoustically shielded;
high security/safety; or combinations of the above.
Ormandy Group - Bradford, UK
Design, manufacturers and servicing of off-site plant, heat exchangers and
other HVAC (heating, ventilation and air conditioning) products.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving customers in
industrial markets.
Adaptix Ltd - Oxford, UK
Adaptix has developed novel 3D X-ray for Orthopaedic and Veterinary
applications amongst others. Commercialisation of this system (and others) is
on-going.
Magnetica Ltd - Brisbane, Australia
Magnetica Limited specialises in the development of next generation MRI
technologies, including dedicated extremity MRI systems and MRI system
components. Magnetica has successfully built and tested a compact, integrated
3 Tesla orthopaedic MRI system, demonstrating clinical-quality imaging.
Commercialisation of this system (and others) is on-going. Magnetica's
structure now includes two other business units:
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and associated
cryogenics for a variety of markets including MRI and provides services for
Nuclear Magnetic Resonance instruments.
Tecmag Inc - Houston, USA
Designs, manufactures and installs instrumentation, including consoles, system
upgrades, and probes, mainly for Magnetic Resonance Imaging (MRI) and Nuclear
Magnetic Resonance (NMR) systems.
Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
("MAR") prior to its release as part of this announcement and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.
Chairman's Statement
The latest financial year has been marked by the Group's commendable
performance in the face of well documented ongoing global disruptions. Despite
these challenges, the Board is pleased with the Group's achievements, with
strong organic revenue growth, robust adjusted EBITDA note 2 from continuing
operations and a stable net cash position at the year-end. Notable investments
in Magnetica and HES/HEVAC have contributed to the favourable results, even
amidst supply chain disruptions and customer order delays. As we look ahead to
FY24, our order book position is very healthy.
Our Pinpoint-Invest-Exit ("PIE") strategy was again successfully deployed,
reinforcing our investments in medical imaging at Magnetica and the 3D X-ray
business, Adaptix, which we have now acquired 100% (post period end). Both
ventures continue to make strides in developing disruptive and complementary
medical imaging products, particularly for orthopaedic applications.
Furthermore, the acquisition of HES/HEVAC and its integration into Ormandy has
bolstered the market standing of that business unit. Post period end, we also
completed the significant assets acquisition of Slack and Parr, another
specialist pumps and hydraulics manufacturer to capitalise on its global
footprint, combined with its well-invested operational capability, powerful
brand, highly skilled workforce and large installed base.
Despite the challenging external economic landscape, our divisional management
teams have demonstrated agility and resilience, building strong business
platforms. Aftermarket growth in Engineered Pumps and Motors (EPM) and Process
Solutions and Rotating Equipment (PSRE) has remained steady, supporting our
value propositions to OEM and end-user customers. The positive sentiment in
the nuclear and oil and gas sectors has resulted in increased orders in those
areas. Our focus on end-user access continues to drive improved profitability
and underpins our product and service development.
The EPM division's performance improved over the year, despite supply chain
disruptions and order placement challenges, to end the year with a strong
order book. Energy Steel showed further improvement, with promising
aftermarket prospects and new customers placing orders with us.
The PSRE division also made solid progress, notably at Booth, which
demonstrated continued operational strength and sustained record orders.
Meanwhile, at Metalcraft, the substantial 3M3 box contract with Sellafield
continues in the volume production phase. Our apprentice training school at
the Chatteris site currently has 18 apprentices in house, with further
expansion to come. Combining Ormandy with HES/HEVAC has strengthened both
businesses and we expect to see an improvement in performance in FY24, as a
result.
The acquisition of Adaptix and further investment in Magnetica has firmly
established the Medical and Industrial Imaging (MII) division as a new niche
imaging systems supplier, with promising X-ray and MRI products in the
pipeline. The Board is enthusiastic about the division's potential, expecting
long-term positive returns for the Group, albeit perhaps via a different
vehicle, to maximize returns.
In view of the encouraging overall results, the Board is proposing a final
year dividend of 2.8 pence per share, resulting in a total dividend of 4.5p.
With a robust balance sheet, the Group remains vigilant in seeking shareholder
value-enhancing M&A opportunities, while also being cautious and selective
in the current manufacturing sector climate.
Lastly, I extend my appreciation to all Avingtrans employees, both existing
and new, for their dedication and resilience in navigating these challenging
times.
Roger McDowell
Chairman
26 September 2023
Strategy and business review
Group Strategy
Our core strategy is to buy and build engineering companies in niche markets,
particularly where we see turnaround and consolidation prospects; a strategy
we call Pinpoint-Invest-Exit ("PIE"), through which we have had a strong track
record in returning significant shareholder value over the past decade.
With an increased presence in our target markets, a focus on aftermarkets,
strength in depth of the management teams and a lean central structure, the
Group continues to grow profitably - despite the effects of macroeconomic
disruptions - and the Board is focused on seeking additions to the Avingtrans
value-add proposition.
The majority of the Group's adjusted key financial metrics trended positively
in the period, despite the ongoing impacts of the Russia-Ukraine conflict and
the related global financial stress.
The Group is focused on the global Energy and Medical markets, both of which
play into some of the world's mega-trends, such as: urbanisation; an ageing
population; and an accelerating transition towards a cleaner and healthier
planet.
Divisional Strategies
Engineered Pumps and Motors (Energy - EPM): EPM continues to strengthen its
nuclear installed base, focusing on civil, defence, and national security
applications, particularly for life extension purposes. The business also
explores opportunities in the hydrocarbon market sectors. Energy Steel,
acquired in June 2019 and specialising in nuclear life extension, has shown
consistent recovery in North America. Furthermore, EPM is actively developing
solutions for new nuclear technologies and other low carbon energy sources,
like concentrated solar, to leverage the global energy supply transition.
Throughout FY23, EPM secured significant contracts, including additional pumps
for the next generation nuclear business, TerraPower, in the USA and further
life extension equipment for the Forsmark nuclear power station in Sweden. The
EPM strategy is strengthened by crucial partnership agreements with companies
like Shinhoo, expanding our product portfolio and creating cross-selling
opportunities. The post period end acquisition of Slack and Parr further
enhances our global specialist pumps footprint.
Process Solutions and Rotating Equipment (Energy - PSRE): A primary target for
PSRE is to establish a comprehensive offering in the nuclear decommissioning
and reprocessing markets, building on long-term contracts for nuclear waste
storage containers and the existing equipment installed across the vast
Sellafield site. During the period, Metalcraft and Sellafield Limited
continued with the contract to provide high integrity stainless steel storage
boxes for Sellafield. The 3M3 ('three metre cubed') box contract is currently
now valued at up to £70m and is still to complete. The division's nuclear
credentials were again enhanced by Booth Industries' strong performance,
expanding our market reach into Critical National Infrastructure (CNI).
Booth's multi-year contract with HS2, initially worth £36m, is progressing
well, with manufacturing expected to commence in FY24. Ormandy's market
position in HVAC has been significantly strengthened by the HES/HEVAC
acquisition, with a resulting stronger product proposition. PSRE continues to
benefit from a robust prospect pipeline, positioning it well to bid for new
opportunities as they arise.
Medical and Industrial Imaging (Medical - MII): Following the Magnetica
acquisition in January 2021 and the post-period end acquisition of the
remaining shares in Adaptix, the focus for the medical division is to become a
niche market leader in the production of compact helium-free MRI systems and
3D X-ray systems, for applications such as orthopaedic and veterinary imaging.
This is an exciting opportunity for the Group. In support of the core
strategy, the division will continue to work on niche Nuclear Magnetic
Resonance (NMR) and scientific magnet products and services, since these are
complementary technologies. During the year, Adaptix, based in Oxford, UK,
received its 510(k) approval from the FDA, to enable sales of its orthopaedic
product in the USA. Adaptix's 3D X-ray technology is being developed in
parallel to Magnetica's MRI technology and, as envisioned, the two businesses
are working in an increasingly complementary manner.
Across the Group's customers, we see continued pressure on aftermarket
expenditure, where operational efficiency, reliability and safety are
paramount. Customers are looking for reliable supply chain partners, to
provide long term support of both new infrastructure and legacy installations.
Pinpoint-Invest-Exit
Continuing with our successful Pinpoint-Invest-Exit strategy, Avingtrans
demonstrated its commitment by raising its stake in Magnetica to 71.7% during
the period (at 26 September 2023 74.8%). Additionally, post period end, we
successfully completed the 100% acquisition of Adaptix, as mentioned earlier.
During the period, we also exited from Metalcraft China, selling the business
for £1.0m to a local manufacturer. After our interest in MRI component
manufacture ended as planned, there was no viable strategic reason to keep
this business unit in China. However, we were pleased to find a good home for
it, to ensure that all our employees there continued to enjoy gainful
employment.
The focus on other strategic acquisitions remained strong, with the addition
of HVAC specialist HES/HEVAC, for a total consideration of £0.9m, already
contributing positively to Ormandy's market strength, after a smooth
integration process. Post period end, the acquisition of the assets of Slack
and Parr, in the UK, USA and China, for a consideration of up to£4.9m, added
another specialist pumps and hydraulics capability to the Group.
The ongoing progress at previous acquisitions, Booth and Energy Steel, was
again pleasing, as both businesses contributed strongly to the results of
their respective divisions.
The Group remains confident about the current strategic direction and
potential future opportunities across its chosen markets. Some of our market
sectors (eg Nuclear) benefitted from the global disruptions seen in the
period, which drove higher energy costs and caused governments to review
energy security.
Markets - Energy
The global demand for energy remains relentless and we anticipate a sustained
period of growth in the coming years. The aftermath of the Covid pandemic
spurred a push towards enhanced efficiency and decarbonisation. However, the
Russia-Ukraine conflict subsequently raised political awareness regarding the
importance of energy security, leading to a recalibration of the rush towards
renewable energy in the short to medium term. This situation could potentially
benefit our businesses, particularly in the nuclear sector.
End User/Aftermarket
Operators and end-users demand a blend of quick response through local support
and a requirement to drive improvements through equipment upgrades and
modernisation. Facilities are being operated for much longer than their
intended design lives, resulting in a strong demand for solution providers in
the supply chain to partner with end-users for the longer term. The Avingtrans
energy divisions are well positioned to grow in this end-user market space.
Nuclear
Nuclear energy as a low carbon, baseload power source remains an asymmetric
market with respect to future growth. Almost all the 1GW+ new build
opportunities are in Asia, with the exception of the limited UK programme.
However, we are still experiencing buoyant market segments, including
supporting the operational fleet, continued safe operation and life
extensions, decommissioning and reprocessing. We are also working on the
long-term development of the next generation of technologies - i.e. Small
Modular or Advanced Generation IV Reactors - e.g. with TerraPower and
GE-Hitachi. In addition, these segments all have the backdrop of a
consolidating supply chain and paucity of expert knowledge.
The USA still operates the biggest civil nuclear fleet in the world, with 92
reactors generating around 30 percent of the world's nuclear electricity.
Coupled with the heritage Westinghouse technology operating in Europe and
Asia, the EPM division's long-standing position in this market provides
opportunities for further growth. Obsolescence and life extension are key
issues for nuclear operators worldwide and the Avingtrans Energy Divisions are
well positioned to support operators in addressing this critical risk.
The UK remains pre-eminent when it comes to decommissioning nuclear facilities
and subsequent reprocessing, in terms of innovative technology and overall
spend. The Group is embedded in the future manufacture of waste containers for
Sellafield and will continue to expand its presence in the UK and globally in
the longer term. The development of new nuclear technologies is ongoing, with
activity in the UK, South Korea, the USA and China dominating development
activity. The Group views these new technologies as an attractive route
forward for nuclear and is well positioned to develop as a global industry
partner.
Power Generation
The world continues to electrify, with an increasing amount of primary energy
going to the power sector, which remains a key focus across the Group's energy
divisions. Aside from nuclear, the main sub-sectors are as follows:
· Coal - the Group continues to see good aftermarket activity from coal
fired power stations even though the demand for new power stations is in
decline. Opportunities still exist in India, China, Southeast Asia, Eastern
Europe and the Middle East. EPM is optimising its product line, to take market
share and to create new opportunities - e.g. in products to remove toxins from
the exhaust stacks of power stations.
· Gas - natural gas, primarily in the form of combined cycle gas
turbine power plants has been a growing market space, primarily in the West,
albeit disrupted by the Russia-Ukraine conflict. The Group continues to
develop this market with both existing and new product lines.
· Renewables - renewable technologies and their supporting
infrastructure are a growing market globally. The Group has a range of
products that can be applied directly to this market segment and also has
expertise that can be used to develop new products for niche parts of this
market, such as molten salt pumps for concentrated solar applications.
Hydrocarbons
The ongoing conflict in Ukraine resulted in a surge in European gas prices,
leading to unprecedented levels of volatility in the energy market. Our
Hayward Tyler businesses have long been associated with providing top-notch
subsea and submersible pumps and motors to the oil and gas fields of the
Norwegian Shelf. Recently, we have experienced a significant boost in demand
for both new equipment and aftermarket services, as the market seeks to
maximise supplies from this region. The current situation, coupled with
informed forecasts, indicates that the demand for our products and services is
likely to remain strong. This presents a promising opportunity for our
business to further capitalise on the evolving energy landscape.
Markets - Medical
The Diagnostic (medical) and molecular imaging markets are large global
sectors, dominated by a few large systems manufacturers. The total Medical
Imaging Market is expected to reach $47.4 billion by 2030 according to Grand
View Research, a compound annual growth rate of 4.8%. The largest market is
the USA, followed by Europe and Japan. The fastest growing markets are China
and India. Following the acquisition of a majority stake in Magnetica (AUS) in
January 2021, we merged Magnetica with Scientific Magnetics (UK) and Tecmag
(US) and we have continued to invest in Magnetica. Post-period end, we
acquired 100% of Adaptix, for £8.1m, including debt absorbed and repaid.
Adaptix is an emerging medtech leader in the field of 3D X-ray equipment. The
objective of this acquisition activity is to create innovative, niche MRI and
X-ray systems supplier, which can address specific parts of the market, not
well served by dedicated products at present. This includes orthopaedic and
veterinary imaging. The development paths of Magnetica and Adaptix are
convergent, which enables both businesses to benefit from efficiency and cost
gains, as well as optimising the route to market - especially in orthopaedics.
Market drivers for these segments include an ageing global population and the
rising incidence of chronic diseases.
The growing prevalence of chronic diseases, especially in older populations,
is increasing demand for medical imaging in hospitals and other diagnostic
settings. Technical innovations, including advances in artificial
intelligence, have increased the reliability and accuracy of medical imaging,
thus driving further demand in global healthcare. Conversely, the market is
somewhat inhibited by the high cost of current medical imaging systems.
In 2023, X-ray systems held approximately 32% of the market share, while MRI
systems accounted for around 18%. Our estimates indicate that over 20% of all
diagnostic imaging scans are related to limbs. As a result, the combined
addressable market for Magnetica and Adaptix in medical imaging is
approximately $3 billion, in theory. However, it's important to note that the
actual addressable market is smaller, since both businesses have chosen not to
target sales to hospitals. Instead, they are focusing on deploying their
products in specialised clinics, where the product attributes align closely
with the specific needs of these establishments.
Additionally, both Magnetica and Adaptix have plans to expand into other
imaging markets, notably the veterinary sector. This is in response to the
lack of dedicated products in this area, which has hindered the widespread use
of imaging systems in veterinary practices. By targeting these specialised
markets and addressing their unique requirements, both companies aim to
further grow their market share and create a disruptive impact in the medical
and veterinary imaging industries.
End User/Aftermarket
Diagnostic imaging is dominated by a handful of manufacturers, including GE,
Siemens, Philips and Canon, who account for circa 80% of revenue globally.
These players also dominate the aftermarket, though there are a few
independent MRI service businesses in existence. Avingtrans is not present in
the imaging aftermarket at this time.
Operations
Operational Key Performance Indicators (KPI's) for continuing operations
2023 2022
Percentage of total continuing revenue deriving from aftermarket (AM) sales 40.5 42.0
(%)
Customer quality - defect free deliveries (%) 91.3 93.6
Customer on-time in-full deliveries (%) 79.9 80.5
Annualised staff turnover including restructuring (%) 18.5 17.4
Health and Safety incidents per head per annum 0.08 0.07
Environmental incidents per annum 0 0
Although total AM sales increased strongly in the period, the percentage of
total sales was reduced, due to a much larger increase in OEM sales in FY23.
Customer quality and on time in full (OTIF) deliveries both dipped slightly,
as supply chain disruptions continued to impact our operations in all
countries. These disruptions have led us to carry more stock than ideal, to
mitigate delivery delays. There are some early signs of this situation easing
in the new FY.
Annualised staff turnover went up slightly, driven mainly by a larger than
average number of retirements in the year.
H&S incidents per head per annum was up very slightly at 0.08. The
increase was due to a number of minor incidents at HES/HEVAC post-acquisition.
After we integrated the business into Ormandy's main site, H&S incidents
reduced back to normal levels.
As in 2023, there were zero environmental incidents recorded in the Group.
EPM Division - Energy
The EPM division, comprises Hayward Tyler (HT) and Energy Steel (ES), with
Slack and Parr being added post period end. The main divisional priorities
remain: strengthening the aftermarket sales and capabilities and; maximising
opportunities in the nuclear life extension market.
The division's results further improved in the period, though there was a
notable increase in OEM sales. Some adverse supply-chain disruption effects
continued throughout the year but the impact was less pronounced than in the
prior year.
At HT Luton, our aftermarket activities are experiencing significant demand,
notably in servicing of third-party equipment. In the hydrocarbons sector,
elevated enquiries and orders continued throughout the year. HT Luton received
a follow up £3.3m contract from Forsmark nuclear power station in Sweden and
other nuclear life extension orders have followed elsewhere. The team also
secured further defence related orders from Rolls Royce, for the UK MoD.
Regarding the HT Luton site redevelopment, there has been little recent
progress, as the increase in interest rates in the UK has dampened
construction interest for the time being.
HT Inc, located in Vermont (USA), has maintained a strong order intake in the
nuclear life extension market, both domestically in the USA and with KHNP in
South Korea. Despite the challenges, HT Inc is making significant progress in
exploring new R&D opportunities, particularly in the field of
next-generation nuclear power. These endeavours are advancing steadily, and we
have secured further orders from TerraPower after the close of the previous
period. This indicates the positive direction our Company is moving towards,
reaffirming our commitment to innovation and growth in the nuclear industry.
Our Fluid Handling business in Scotland maintained its consistency, with
another good performance in the period. The Transkem mixer business, acquired
in the prior year, contributed strongly to the results.
The acquisition of the assets of Slack and Parr, in Kegworth, UK (post period
end) adds another significant specialist pumps capability to the divisional
armoury. S&P specialise in precision gear pumps, used in a variety of
applications - eg - in the production of textile fibres. Initial activities
will focus on stabilising S&P's UK operations, which are disordered and
inefficient, following the administration process.
HT Kunshan (China) had another good year, with a number of new orders being
received and delivered and a strong pipeline, resulting from the Chinese
government initiative to reduce emissions from coal fired power stations. This
has given HT a new product line to pursue in the short to medium term.
HT India had a better year, having previously suffered from disruptions due to
Covid-19. So, the business performance was back to normal in the period.
Energy Steel ('ES') in Michigan (USA), delivered an improved set of results
from the previous year. The business has been winning new orders from a
broader market footprint, including first orders from TerraPower. ES has also
improved its on time delivery performance in the year.
PSRE Division - Energy, safety and security
PSRE had another very solid year, albeit still impacted by supply chain
disruptions and order delays, as seen elsewhere in the Group.
Booth performed well and has sustained a record order book, including the HS2
£36m contract, which has now entered the production phase. We have
successfully rebuilt Booth into a leader in its high integrity doors market
niches, both in the UK and internationally. We continue to make good progress
in building an aftermarket business at Booth, where we see strong growth
potential.
Metalcraft's progress with the Sellafield 3M3 boxes was good overall, as the
production phase two of the contract continues. The contract value was boosted
to £70m in phase two (previously £50m) with circa 1,000 boxes to be
delivered over the next six years. Metalcraft is the only supplier to
transition to phase two of the contract. Frustratingly, the next 3M3 box
contract tender remains on the horizon, with uncertain timing but we are very
well placed to pursue this contract and it does not impact on our forecasts.
Metalcraft China was sold to a local Chines manufacturer for, £1.0m, at the
end of the period. Following our exit from MRI third party component
manufacture, we did not have a strategic use for this facility but we were
pleased to secure this sale and sustain the employment of all of our former
colleagues there.
Ormandy's management team was strengthened during the year and, as a result,
its performance measurably improved. During the second half of FY23, we
acquired the assets of local competitor HES/HEVAC for £0.9m and transferred
its 30 employees mainly into Ormandy's Bradford site. The integration has gone
smoothly, and the enhanced market offering of the combined business,
reinforces Ormandy's prospects, with a strong order book already evident.
Composite Products had a solid year, with stable deliveries to Rapiscan for
package scanning equipment and post period end secured further orders for
Rapiscan.
The Group continued to invest in Magnetica in the period and, as at 31 August
2023, currently owns 74.8% of the business. Magnetica is continuing to work
towards new niche products in Magnetic Resonance Imaging (MRI) We are making
good progress on this exciting project, with the first orthopaedic product
expected to be launched during FY24 and 510(k) market entry approval from the
US FDA to follow in the first half of calendar 2024. Magnetica will also
continue to work on products for the adjunct Nuclear Magnetic Resonance (NMR)
market, via Tecmag Houston and on superconducting magnets for physics
applications, via SciMag in the UK.
During the period, we made a further investment in Adaptix (Oxford, UK) worth
£4.0m in total. Post period end, we agreed to buy the remaining shares in
Adaptix for £2.7m and also took on existing debts of £2.1m, repaid debt of
£3.3m.
The plans of Adaptix and Magnetica are convergent. We are seeking to exploit
this parallel track, to optimise costs in both businesses and to improve
market penetration. In the period, Adaptix began to place first products in
the veterinary imaging market and also received its 510(k) approval from the
FDA, to allow sales of its product for the orthopaedic market in the USA.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators to monitor the
business, as set out below (all items are "from continuing operations", after
restating for discontinued Metalcraft China in FY23).
Revenue: 17.5% increase - underlying organic growth continues
Overall, Group continuing revenue increased to £116.4m (2022: £99.1m),
driven largely by organic growth in the EPM and PSRE divisions. Revenue
included £2.9m stemming from HES/HEVAC, acquired in the period.
Gross margin: Stable despite some OEM/AM mix effects in the year.
Group gross margin reduced slightly to 32.9% (2022: 34.1%) partly due to the
relatively higher percentage of OEM sales in the year, versus FY22.
Profit margin: Another improvement in results, despite global disruption
Adjusted EBITDA (note 2) increased to £13.7m (2022: £12.4m). PSRE was
boosted by strong results across the division, with robust results at Booth.
The profit margins in the EPM division also continued to improve, as market
conditions stabilised somewhat. In FY23, the overall increase in revenue
resulted in a slight decrease in the split of AM and OE, with a corollary
slight reduction in EBITDA margin percentages, along with the initial HES
Revenue being just above break even.
Operating profit was £8.0m (2022: £7.2m), in line with the EBITDA
improvement seen above, and lower exceptional costs.
Profit was suppressed by £0.4m in the year, by the Board's proactive decision
to make an ex gratia payment of £500 each to all employees in December 2023,
to help with the cost of living in various countries.
Tax: Future profits and cash protected by available losses
The effective rate of taxation at Group level was a 16.7% (2022: 13.9%) tax
charge. A US tax rebate in FY23 (note 3) kept the charge lower than expected
and the use of brought forward losses in the UK. The tax position will be
aided further in the coming years by utilisation of losses in the UK. We
continue to be cautious, not recognising all of the potential trading tax
losses in the UK.
Adjusted diluted Earnings per Share (EPS) increased
Adjusted diluted earnings per share from continuing operations (note 4)
increased to 23.4p (2022: 21.6p) reflecting the underlying growth in results,
offset by a higher tax charge due to the increase in the UK tax rate (FY22 had
a lower overall tax charge following a US tax rebate). Adjusted diluted
earnings per share attributable to shareholders reduced to 19.9p (2022:
21.8p), due to the discontinued losses for the trading and disposal of
Metalcraft China.
Basic and diluted earnings per share attributable to shareholders from
continuing activities decreased to 15.7p (2022: 18.9p) and to 15.3p (2022:
18.3p), due to the discontinued losses for the trading and disposal of
Metalcraft China.
Funding and Liquidity: Ongoing strong net cash position
Net cash (including IFRS16 debt) at 31 May 2023 was £9.1m. Excluding IFRS16
debt, Net cash was £13.0m, (31 May 2022: Net cash (including IFRS16 debt) was
£13.3m and excluding IFRS16 debt was £16.7m). The cash flows generated from
the strong underlying profits were subdued by a £2.3m working capital
outflow, mainly due to the delayed timing of various contracts, carrying
increased stock due to supply chain disruption and working capital outflow for
the HES/HEVAC acquisition, resulting in an operating cash inflow of £9.6m for
the year (2022: £3.7m). In addition to £4.0m invested in Adaptix, £5.3m was
invested in development costs primarily in relation to: Magnetica's compact
helium-free MRI system £3.7m; HTI Bearings £1.1m. A further £3.3m into
property plant and equipment, £1.5m lease renewals at Magnetica, HTI and
Kunshan, FH Doosan machine £0.2m) and loan repayments of £2.8m, with the
Group still in a strong net cash position. The Directors consider that the
Group has sufficient financial resources to deliver strategy, so the Group is
actively looking for further value enhancing opportunities.
Dividend: Progressive dividend policy continues
A final dividend of 2.8p per share is proposed, making a total dividend of
4.5p per share (2022: 4.2p). The dividend will be paid on 8 December 2023, to
shareholders on the register at 27 October 2023.
People
There were no changes at Board, or divisional management level in the period.
The next tier management teams in each of the three divisions continue to be
strengthened, with a number of key appointments being made in the year,
notably in Medical, which is growing quite quickly. Skills availability
remains a challenge. However, we do not expect to be unduly constrained by
shortages, although the global economic situation caused wage inflation across
the Group and made recruitment more difficult. We continue to invest
significant effort in developing skills in-house, through structured
apprenticeship programmes and graduate development plans. The Group continues
to be recognised nationally for the strength of its apprenticeship training
schemes.
Environmental, Social and Governance (ESG) Report
Avingtrans believe that operating in a safe, ethical and responsible manner is
at the heart of creating sustainable value for all our stakeholders.
Environmental
As the Group is listed on the LSE AIM market, we fall within the newly
introduced Climate-Related Financial Disclosures ("CRFDs") regime. The 4
pillars of this regime are governance, strategy, metrics and targets, and risk
management.
Governance
Our Board oversees our approach to sustainability, including climate change.
Under the board sits a Sustainability Committee represented by employees from
across the Group. The Committee is responsible for promoting and implementing
environmental programmes and collecting and monitoring environmental data. The
Sustainability Committee provides regular updates and briefings to the Board.
Strategy
In 2021, we reassessed our approach to sustainability, with a view of
integrating a sustainability strategy into our core business activities,
aligning ourselves with the UN's Sustainable Development Goals (SDGs). From
our sustainability assessment we identified 2 principal areas of environmental
focus, these are:
· Operational eco-efficiency
· Development of new technologies
Operational eco-efficiency looks at improvements we can make at a site level,
including reducing the manufacturing footprint of our sites, investment in
improvements, and establishing a culture which promotes carbon reduction.
Development of new technologies allows us to benefit from opportunities
designed to mitigate issues associated with climate change. The Group can
benefit from its advanced engineering capabilities and world-class
technologies to develop new products and services that support low carbon or
reduced emissions requirements.
Risk management
Our approach to identifying, assessing and managing environmental risks,
including climate related risk, is embedded within our approach to risk
management. Environmental risks may present as financial or non-financial
risks depending on the extent to which their impacts can be quantified, and
how they have been classified.
Climate change and environment is a principal risk for the Group.
Climate-related risks and opportunities
A summary of the climate-related risks and opportunities identified as having
a potentially material impact on the Group, and our associated controls,
includes:
Shift to renewables
Most countries we sell into are moving away from fossil fuels towards
renewables.
Demand for our hydrocarbon range of products could be adversely impacted.
Conversely, we could see greater opportunities for our nuclear products.
The Group has been investing in products for next generation nuclear,
including fusion, molten-salt fast reactors, and small modular reactors.
Extreme weather events
Disruption could be caused by a range of events, for example, flooding,
extreme temperatures, and drought.
Extreme temperatures will increase the energy required to heat or cool our
facilities and in extreme cases may cause site closures and a range of
logistical issues.
We have seen such issues rising across the Group in recent years, for example
record levels of smog in Delhi, India, because of drought and industrial
emissions.
Levels of regulation
The Group operates in a highly regulated environment across many jurisdictions
and is subject to regulations relating to environmental factors including, but
not limited to, climate change, therefore consideration of current and
emerging regulation within our environmental management system is key to
mitigating risk. Identified regulatory risks include energy-related taxes and
the increased costs of compliance with energy-related schemes.
Statement of carbon emissions -compliance with Streamlined Energy and Carbon
Reporting (SECR)
We report greenhouse gas Scope 1, 2 emissions in line with the Streamlined
Energy and Carbon Reporting (SECR) regulations.
Given the Group makes regular disposals and acquisitions we do not consider
absolute carbon emissions to be an appropriate method for tracking emissions,
instead we focus on carbon intensity ratios.
We have adopted a portfolio approach to tracking carbon emissions. For the
divisions operating in the energy sector (EPM and PSRE) we monitor carbon
emissions per £m of revenue. The Medical division has a greater focus on
product development, so instead we focus on emissions per employee.
Sites track their energy usage from a number of sources, including meter
readings, mileage reports, and invoices, then converts these inputs to energy
(kWh) and carbon emissions (tCO2e) using relevant conversion factors.
Conversion factors are published by the UK Department for Environment, Food
and Rural Affairs and the US Environmental Protection Agency (EPA).
Our energy usage and carbon emissions are:
2023 2022
EPM & PSRE MII Group EPM & PSRE MII Group
Scope 1:
Gas 623 21 644 863 26 889
Oil 386 - 386 605 - 605
Distribution 13 2 15 30 - 30
Company vehicle travel 14 - 14 13 6 19
1,036 23 1,058 1,511 32 1,543
Scope 2 - Purchased electricity 843 203 1,046 901 204 1,105
Total emissions tCO2e 1,879 226 2,104 2,412 236 2,648
Total energy consumption mWh 9,441 544 9,986 11,204 560 11,764
Intensity metrics:
Average employees 673 59 732 634 44 678
Emissions tCO2e per employee 2.8 3.8 2.9 3.8 5.4 3.9
Revenue (£m) 112.8 3.6 116.4 96.6 2.5 99.1
Emissions tCO2e per £m of revenue 16.6 62.7 18.1 25.0 94.4 26.7
UK proportion of:
Total emissions tCO2e 79% 21% 73% 81% 25% 76%
Total energy consumption mWh 77% 46% 75% 80% 50% 79%
In compliance with the SECR guidance, electricity emissions are based on grid
averages from the regions we operate. As entities within the Group have
transitioned to obtaining their power through renewable energy providers our
actual electrical emissions will be lower.
The PSRE and EPM division's intensity target is to reduce its tCO2e per £m of
revenue. In the year tCO2e £m of revenue improved by 33% to 16.6 (2022:
25.0). We expect to reduce revenue intensity further in the next financial
year.
The MII division's intensity target is to reduce its tCO2e per employee. In
the year tCO2e per employee has reduced 29% to 3.8 (2022: 5.4).
Integration of environmental considerations into our Pinpoint-Invest-Exit
strategy
The Group has expanded upon its environmental due diligence procedures, which
historically used to focus on potential environmental liabilities. The focus
has now shifted towards identifying opportunities to improve business
performance through energy reduction initiatives.
We strongly believe that investing in next generation manufacturing facilities
and development of new technologies is key to generating a sustainable
business for the long term. Demonstrating to potential buyers our
environmental credentials and technological capabilities is a key component of
our Exit strategy.
Progress in the year
Operational eco-efficiency
A significant proportion of the Group's energy consumption is spent heating
premises over the winter months. At some of the older facilities energy in the
winter months (December, January and February) can be as much as 4 times
higher than over summer (June, July and August). A focused effort has been
made to reduce winter energy consumption. This includes the installation of
new boilers, additional insulation, automatic timers on heating, as well as
reducing the manufacturing footprint.
We carried out a Carbon whole life cycle impact assessment also known as the
LCA to measure embedded carbon in some of our key products. This process was
guided by the ISO 14067 Lifecycle Carbon Assessment ("LCA") to measure and
investigate improvement opportunities that can cut carbon emissions. On the
back of this research, we have implemented a number to our products and
processes including:
· Selection of higher quality materials designed to increase the
useful life of products and reduce maintenance.
· Introduction of reusable packaging and packaging which can be
fully recycled.
· Negotiating with customers to make fewer, larger shipments of
products in order to reduce delivery emissions.
Development of new technologies
Next generation nuclear: Molten Chloride Fast Reactor
Our US Hayward Tyler business has been developing high-temperature molten salt
pumps, destined for a state-of-the-art Integrated Effects Test (IET) facility,
under development by Southern Company and TerraPower, to advance development
of the Molten Chloride Fast Reactor (MCFR). This is a transformational,
fourth-generation, molten salt nuclear technology, designed to enable
low-cost, economywide decarbonization. Located at TerraPower's Everett,
Washington facility, the IET is a non-nuclear, externally heated multi-loop
system, intended to test and validate integrated operation of MCFR systems, as
well as demonstrate multiple auxiliary MCFR functions.
During the year, the Group secured an extension to for the continued
development of next generation molten salt pumps, under the Advanced Reactor
Demonstration Program.
Nuclear energy and decommissioning represent 27% of the Group's revenues in
the year. The Group believe that working on next generation nuclear projects
including MCFR in the US, ITER in France, and Small Modular Reactors ("SMRs")
in the UK, will strengthen the Group's long-term position in the nuclear
industry.
Helium-free magnets
Existing MRI systems rely on liquid helium, to cool the superconducting
magnets at the heart of each system. Helium is a scarce, non-renewable
resource, mostly obtained as a by-product of oil extraction. Therefore, in our
new compact MRI designs, we are seeking to take advantage of the smaller
system footprint, to enable us to rely on mechanical cooling only, thus
virtually eliminating use of helium in these systems.
An update on the status of the progress on the MRI development can be found in
Medical Division review on page 10.
Social
Social Responsibility
It is paramount that the Group maintains the highest ethical and professional
standards across all of its activities and that social responsibility should
be embedded in operations and decision making. We understand the importance of
managing the impact that the business can have on employees, customers,
suppliers and other stakeholders. The impact is regularly reviewed to sustain
improvements, which in turn support the long-term performance of the business.
Our focus is to embed the management of these areas into our business
operations, both managing risk and delivering opportunities that can have a
positive influence on our business.
Employees
The Group places considerable value on the involvement of its employees and
has continued to keep them informed on matters affecting them directly and on
financial and broader economic factors affecting the Group. The Group
regularly reviews its employment policies. The Group is committed to a global
policy of equality, providing a working environment that maintains a culture
of respect and reflects the diversity of our employees. We are committed to
offering equal opportunities to all people regardless of their gender,
nationality, ethnicity, language, age, status, sexual orientation, religion or
disability. We believe that employees should be able to work safely in a
healthy workplace, without fear of any form of discrimination, bullying or
harassment. We have been rolling-out a "dignity and respect" training program
across the Group. We believe that the Group should demonstrate a fair gender
mix across all levels of our business, whilst recognising that the
demographics of precision engineering and manufacturing remain predominantly
male, which is, to an extent, beyond our control.
Apprenticeships and training
All larger group locations are running apprenticeship schemes for young
people, both to act as socially responsible employers and to optimise the
demographics of our workforce over the mid to long term.
The apprentice training school, based at Metalcraft, Chatteris is now fully
operational. We are partnered with West Suffolk College (WSC) as the operator
and training provider at the centre, which plans to take on between 80 and 130
students each year. Construction of the centre was funded through a £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. At 31 May 2023, the Group had 29 apprentices.
Health, safety, and wellbeing
The Group takes H&S matters and its related responsibilities very
seriously.
As regular acquirers of businesses, we find different levels of capability and
knowledge in different situations. A frequent investment need in smaller
acquisitions is to spread H&S best practice from other Group businesses
and bring local processes up to required standards. Larger acquisitions
usually have well developed H&S processes and we seek to learn from these
in other business units.
Employee equality, welfare and engagement are critical for developing our key
asset. We focus on pro-active actions, including, internal training,
certifications, and employee engagement through listening, survey and
involvement.
Our Health and Safety KPIs can be found in the key performance indices section
of the strategic report (page 8). Health and Safety incidents per head per
annum rose to 0.08 in the year (2022: 0.07) driven by the acquisition of the
HES/HEVAC businesses. Excluding the new acquisition incidents per head per
annum would have remained flat at 0.07. At Board level, Les Thomas has H&S
oversight and he conducts inspections with local management, as appropriate.
During the year, there have been no fatalities or serious injuries at any of
our sites.
Ethical policy
The Group complies with the Bribery Act 2010. We do not tolerate bribery,
corruption or other unethical behaviour on the part of any of our businesses
or business partners in any part of the world. Employee training has been
completed in all areas of the business to ensure that the Act is complied
with.
Outlook
Avingtrans is a niche engineering market leader, principally in the Energy and
Medical and Industrial sectors, with a successful profitable growth record,
underpinned by our 'PIE' strategy. Recent acquisitions will provide further
opportunities for the Group to build sustainable value for investors in
resilient market niches. We will continue to be prudent and seek to
crystallise value and return capital when the timing is right, as part of the
PIE strategy implementation. Our PIE strategy has served us well in the
current crisis and could result in further opportunities to grow shareholder
value.
The Group continues to invest in its three divisions, with a focus on the
global energy and medical markets, to position them for maximum shareholder
value, via eventual exits in the years to come. Magnetica's MRI product
development is proceeding to plan, with an expected launch of the orthopaedic
product later in 2023, subject to FDA approval in the USA, expected during
FY24. This activity is fully complemented by the post-period end acquisition
of Adaptix and its disruptive 3D X-ray technology. The earlier acquisitions of
Booth and Energy Steel continued to recover well, as demonstrated by the
results in the period. The Group is in a strong net cash position, so we are
proactively pursuing potential PIE prospects, with the ability to capitalise
on any suitable strategic opportunities. Our value creation targets continue
to be accomplished as planned and are underpinned by a conservative approach
to debt.
The energy divisions have a strong emphasis on the thermal power, nuclear and
hydrocarbon markets and aftermarkets. The medical division is focused on
compact, helium-free MRI systems and compact point of care 3D X-ray systems,
which the Board believes could create significant future shareholder value. To
drive profitability and market engagement, each division has a clear strategy
to support end-user aftermarket operations, servicing its own equipment and
(where pertinent) that of third parties, to capitalise on the continued market
demand for efficient, reliable and safe facilities.
The Russia-Ukraine conflict and resulting inflationary effects on the global
economy is still a significant risk factor. However, we have taken effective
cost and impact mitigation actions so far, to limit any potential downside and
we will continue to be vigilant.
Despite the current global macroeconomic environments, our markets continue to
develop and M&A opportunities remain a priority for us. Businesses like
ours can command high valuations at the point of exit. The Board remains
cautiously confident about the current strategic direction and potential
future opportunities across our markets. We will continue to refine our
business by pinpointing specific additional acquisitions as the opportunities
arise, to create superior shareholder value, whilst maintaining a prudent
level of financial headroom, to enable us to endure any subsequent headwinds.
The Strategic Report was approved by the Board and signed on its behalf by:
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
26 September 2023 26 September 2023 26 September 2023
Consolidated Income Statement Note 2023 2022
£'000 £'000
Revenue 1 116,437 99,075
Cost of sales (78,137) (65,242)
38,300 33,833
Gross profit
Distribution costs (4,458) (3,630)
Administrative expenses (25,866) (23,018)
9,452 8,494
Operating profit before amortisation of acquired intangibles, other
non-underlying items and exceptional items
Amortisation of acquired intangibles (993) (869)
Share based payment (237) (188)
Acquisition costs (14) (29)
Restructuring costs (232) (93)
Other exceptional items - (130)
Operating profit 1 7,976 7,185
Finance income 109 176
Finance costs (609) (386)
7,476 6,975
Profit before taxation
Taxation 3 (1,246) (971)
Profit after taxation from continuing operations 6,230 6,004
Profit after taxation from discontinued operations (1,168) 57
Profit for the financial year 5,062 6,061
Profit is attributable to:
Owners of Avingtrans PLC 5,194 6,478
Non-controlling interest (132) (417)
Total 5,062 6,061
Earnings per share:
From continuing operations
- Basic 4 19.4p 18.7p
-Diluted 4 18.9p 18.1p
From continuing and discontinuing operations
-Basic 4 15.7p 18.9p
-Diluted 4 15.3p 18.3p
Consolidated Statement of Comprehensive Income
2023 2022
£'000 £'000
Profit for the year 5,062 6,061
Items that will not subsequently be reclassified to profit or loss
Remeasurement of defined benefit liability (1,388) 95
Income tax relating to items not reclassified 347 (24)
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations (579) 1,445
3,442 7,577
Total comprehensive income for the year attributable to equity shareholders
Consolidated Balance Sheet Note 2023 2022
£'000 £'000
Non current assets
Goodwill 21,585 21,420
Other intangible assets 18,790 15,675
Property, plant and equipment 23,612 25,239
Deferred tax 666 1,544
Unlisted Investments 8,000 4,000
Pension and other employee obligations 526 1,688
73,179 69,566
Current assets
Inventories 12,656 11,759
Trade and other receivables: falling due within one year 49,691 46,817
Trade and other receivables: falling due after one year 1,550 1,579
Current tax asset 618 686
Cash and cash equivalents 17,717 24,287
82,232 85,128
Total assets 155,411 154,694
Current liabilities
Trade and other payables (32,140) (29,629)
Lease liabilities (1,503) (1,605)
Borrowings (3,077) (5,497)
Current tax liabilities (1,303) (710)
Provisions (1,315) (1,770)
Derivatives (15) -
Total current liabilities (39,353) (39,211)
Non-current liabilities
Borrowings (669) (762)
Lease liabilities (3,328) (3,097)
Deferred tax (3,238) (4,465)
Other creditors (368) (1,342)
Total non-current liabilities (7,603) (9,666)
Total liabilities (46,956) (48,877)
Net assets 108,455 105,817
Equity
Share capital 1,612 1,607
Share premium account 15,979 15,693
Capital redemption reserve 1,299 1,299
Translation reserve 1,170 825
Merger reserve 28,949 28,949
Other reserves 1,457 1,457
Investment in own shares (4,235) (4,235)
Retained earnings 59,811 58,223
Total equity attributable to equity holders of the parent 106,042 103,818
Non-controlling interest 2,413 1,999
Total equity 108,455 105,817
Consolidated Statement of Changes in Equity
at 31 May 2023
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 statement of changes in equity (continued)
at 31 May 2023
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 2022 1,607 15,693 1,299 28,949 825 1,457 (4,235) 58,223 103,818 1,999 105,817
Ordinary shares issued 5 286 - - - - - - 291 - 291
Dividends paid - - - - - - - (1,331) (1,331) - (1,331)
Share-based payments - - - - - - - 237 237 - 237
Total transactions with owners 5 286 - - - - - (1,094) (803) - (803)
Profit for the year - - - - - - - 5,194 5,194 (132) 5,062
Investment in subsidiary with non-controlling interest - - - - 924 - - (1,470) (546) 546 -
Other comprehensive income
Actuarial gain for the year on pension scheme - - - - - - - (1,388) (1,388) (1,388)
-
Deferred tax on actuarial movement on pension scheme - - - - - - - 347 347 347
-
Exchange gain - - - - (579) - - - (579) - (579)
Total comprehensive income for the year - - - - 345 - - 2,683 3,028 414 3,442
Balance at 1,612 15,979 1,299 28,949 1,170 1,457 (4,235) 59,812 106,043 2,413 108,455
31 May 2023
Consolidated Cash Flow Statement for the year ended 31 May 2023 Note
2023 2022
£'000 £'000
Operating activities
Cash flows from operating activities 30 10,682 4,173
Finance costs paid (620) (388)
Income tax (paid)/received (331) 203
Contributions to defined benefit plan (164) (282)
Net cash inflow from operating activities 9,567 3,706
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 36 (852) (582)
Investment in unlisted undertaking 16 (4,000) (4,000)
Disposal of a subsidiary undertaking, net of cash disposed 36 877 -
Finance income 109 176
Purchase of intangible assets (5,401) (1,996)
Purchase of property, plant and equipment (3,291) (2,989)
Proceeds from sale of property, plant and equipment 34 44
Net cash used in from investing activities (12,524) (9,347)
Financing activities
Equity dividends paid (1,331) (1,265)
Repayments of bank loans (2,843) (468)
Repayment of leases (1,771) (1,486)
Proceeds from issue of ordinary shares 291 355
Proceeds from borrowings 2,254 2,493
Net cash outflow from financing activities (3,400) (371)
Net decrease in cash and cash equivalents (6,356) (6,012)
Cash and cash equivalents at beginning of year 23,902 29,736
Effect of foreign exchange rate changes on cash (160) 178
Cash and cash equivalents at end of year 19 17,386 23,902
Notes to the financial statements
1 Segmental analysis
Year ended 31 May 2023 Energy Energy Medical Unallocated Total
EPM PSRE MII central items
£'000 £'000 £'000 £'000 £'000
Original Equipment 21,389 45,413 3,595 - 70,397
After Market 43,200 2,806 34 - 46,040
Revenue 64,589 48,219 3,629 - 116,437
Operating profit/(loss) 5,564 4,581 (1,010) (1,159) 7,976
Net finance (expense)/income (422) (74) (39) 35 (500)
Taxation (charge)/credit (645) (666) (17) 82 (1,246)
Profit/(loss) after tax from continuing operations 4,497 3,841 (1,066) (1,042) 6,230
Segment non-current assets 42,030 12,106 11,043 8,000 73,179
Segment current assets 48,933 22,995 2,544 7,760 82,232
90,963 35,101 13,587 15,760 155,411
Segment liabilities (28,899) (13,635) (4,073) (349) (46,956)
Net assets 62,064 21,466 9,514 15,411 108,455
Non-current asset additions
Intangible assets 1,351 363 3,848 - 5,562
Tangible assets 1,773 1,048 470 - 3,291
3,124 1,411 4,318 - 8,853
Other income statement items: (2,528) (1,452) (314) - (4,294)
Depreciation and amortisation
Unallocated assets/ (liabilities) consist primarily of interest-bearing assets
and liabilities and income tax assets and liabilities.
Segmental analysis has been revised for FY22 following the segment move from
PSRE to EPM for Hayward Tyler Fluid Handling.
Year ended 31 May 2022 Energy Energy Medical Unallocated Total
EPM PSRE MII central items
£'000 £'000 £'000 £'000 £'000
Original Equipment 16,188 38,309 2,426 - 56,923
After Market 39,938 2,183 31 - 42,152
Revenue 56,126 40,492 2,457 - 99,075
Operating profit/(loss) 5,005 4,543 (1,291) (1,072) 7,185
Net finance (expense)/income (126) (56) (23) (5) (210)
Taxation (charge)/credit (1,036) (464) 149 380 (971)
Profit/ (loss) after tax from continuing operations 3,843 4,023 (1,165) (697) 6,004
Segment non-current assets 44,782 13,206 7,578 4,000 69,566
Segment current assets 45,618 19,191 1,828 18,491 85,128
90,400 32,397 9,406 22,491 154,694
Segment liabilities (25,260) (17,376) (3,539) (2,702) (48,877)
Net assets 65,140 15,021 5,867 19,789 105,817
Non-current asset additions
Intangible assets 500 147 1,615 - 2,262
Tangible assets 962 1,429 598 - 2,989
1,462 1,576 2,213 - 5,251
Other income statement items:
Depreciation and amortisation (2,541) (1,032) (367) - (3,940)
1 Segmental analysis (continued)
Geographical
The following tables provides an analysis of the Group's revenue by
destination and the location of non-current assets (excluding deferred tax
assets and defined benefit pension surplus) by geographical market:
2023 2022 2023 2022
Revenue Non-current Non-current
Revenue Assets Assets
£'000 £'000 £'000 £'000
United Kingdom 53,076 45,144 34,954 31,498
Europe (excl. UK) 7,411 6,695 - -
United States of America 28,955 23,383 27,473 27,933
Africa & Middle East 2,705 1,633 - -
Americas & Caribbean (excl. USA) 5,059 3,767 - -
China 10,297 9,057 723 1,771
Asia Pacific (excl. China) 8,934 9,396 8,837 5,132
116,437 99,075 71,987 66,334
2 Adjusted Earnings before interest, tax, depreciation and
amortisation
2023 2022
£'000 £'000
Profit before tax from continuing operations 7,476 6,975
Share based payment expense 237 188
Acquisition costs 14 29
Restructuring costs 232 93
Other exceptionals - 130
Loss/(gain) on derivatives 14 (144)
Amortisation of intangibles from business combinations 993 869
Adjusted profit before tax from continuing operations 8,966 8,140
Finance income (109) (176)
Finance cost 609 386
Gain/(loss) on derivatives (14) 144
Adjusted profit before interest, tax and amortisation from business 9,452 8,494
combinations ('EBITA')
Depreciation 3,720 3,434
Amortisation of other intangible assets 444 374
Amortisation of contract assets 130 132
Adjusted Earnings before interest, tax, depreciation and amortisation 13,746 12,434
('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,
depreciation and amortisation of intangibles had a reduction in the cashflow
in the year. The tax impact on the above costs is relatively immaterial.
3 Taxation
2023` 2022
£'000 £'000
Continuing operations
Current tax
Corporation tax - current year - -
Corporation tax - prior year 77 141
Overseas tax - current year 970 225
Overseas tax - prior year 210 (480)
Total current tax 1,257 (114)
Deferred tax
Deferred tax - current year (15) 860
Deferred tax - prior year 4 170
Deferred tax - rate - 55
Total deferred tax (11) 1,085
Tax charge on continuing operations 1,246 971
Tax (credit)/charge on discontinued operations - -
Total tax (credit)/charge in the year 1,246 971
Corporation tax is calculated at 20% (2022: 19%) of the estimated assessable
profit/loss for the year. Taxation for other jurisdictions is calculated at
the rates prevailing in the respective jurisdictions.
4 Earnings per ordinary share
Basic and diluted earnings per share have been calculated in accordance with
IAS 33 which requires that earnings should be based on the net profit or loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares in issue during the year.
For diluted earnings per share the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares,
being the CSOP and ExSOP share options.
2023 2022
Number Number
Weighted average number of shares - basic 32,187,135 32,070,325
Share option adjustment 820,074 1,063,674
Weighted average number of shares - diluted 33,007,209 33,133,999
2023 2022
£'000 £'000
Profit from continuing operations 6,230 6,004
Share based payment expense 237 188
Acquisition costs 14 29
Restructuring costs 232 93
Other exceptionals - 130
Loss/(gain) on derivatives 14 (144)
Amortisation of intangibles from business combinations 993 869
Adjusted profit after tax from continuing operations 7,720 7,169
From continuing operations:
Basic earnings per share 19.4p 18.7p
Adjusted basic earnings per share 24.0p 22.4p
Diluted earnings per share 18.9p 18.1p
Adjusted diluted earnings per share 23.4p 21.6p
Earnings from discontinuing operations: (1,168) 57
From discontinuing operations
Basic earnings per share (3.6)p 0.2p
Adjusted basic earnings per share (3.6)p 0.2p
Diluted earnings per share (3.5)p 0.2p
Adjusted diluted earnings per share (3.5)p 0.2p
Earnings attributable to shareholders including non-controlling interest 5,062 7,226
Basic earnings per share 15.7p 18.9p
Adjusted basic earnings per share 20.4p 22.5p
Diluted earnings per share 15.3p 18.3p
Adjusted diluted earnings per share 19.9p 21.8p
The Directors believe that the above adjusted earnings per share calculation
for continuing operations is a more appropriate reflection of the Group's
underlying performance.
There are Nil share options at 31 May 2023 (2022: Nil) that are not included
within diluted earnings per share because they are anti-dilutive.
5 Notes to the consolidated cash flow statement
Cash flows from operating activities:
2023 2022
£'000 £'000
Continuing operations
Profit before income tax from continuing operations 7,475 6,975
Loss before income tax from discontinuing operations before disposal (616) 57
Adjustments for:
Depreciation 3,720 3,675
Amortisation of intangible assets 444 374
Amortisation of intangibles from business combinations 993 869
Loss on disposal of property, plant and equipment - 44
Loss on disposal of intangible assets 373 -
Finance income (109) (176)
Finance expenses 609 393
Share based payment charge 237 188
Changes in working capital
Increase in inventories (729) (1,033)
Increase in trade and other receivables (3,628) (7,837)
Increase in trade and other payables 2,814 783
(Decrease)/increase in provisions (857) 32
Other non cash changes (44) (171)
Cash flows from operating activities 10,682 4,173
2023 2022
£'000 £'000
Cash and cash equivalents
Cash 17,717 24,287
Overdrafts (331) (385)
17,386 23,902
6 Acquisitions and disposals
Disposal of Metalcraft (Chengdu) Limited and Metalcraft (Sichuan) Limited
On 31 May 2023, the Group disposed of 100% of its shares in Metalcraft
(Chengdu) Limited and Metalcraft (Sichuan) Limited. Consideration was received
in full during the year.
At the disposal date the carrying amount of net assets held in the business
was as follows:
£'000
Inventories 347
Trade and other debtors 331
Cash 147
Trade and other creditors (287)
Total net assets 538
Consideration comprises:
Cash consideration 1,024
Forgiveness of amounts owed by the disposal group (988)
Total consideration 36
Loss on disposal 502
Cash consideration 1,024
Cash disposed of (147)
Net cash inflow on disposal 877
The loss on disposal is included in the loss for the year from discontinued
operations in the consolidated income statement.
2023 2022
£'000 £'000
Revenue 508 1,330
Other expenses (1,174) (1,273)
(Loss)/profit before income tax (666) 57
Tax expense - -
(Loss)/profit after income tax of discontinued operation (666) 57
Loss on disposal of net asset of discontinued operations (502) -
(Loss)/profit for the year from discontinued operations (1,168) 57
Acquisition of HEVAC and HES
On 30 December 2022, the Group acquired the trade and assets of HEVAC Limited
("HEVAC") a heating ventilation and air conditioning solutions provider based
in Elland, Yorkshire and the business and assets of HeatExchangeSpares.com
("HES") a plates and gaskets supplier, based in Watford. The acquisitions will
complement the Group's Ormandy Rycroft Engineering business and expand its
product range.
The details of the business combination are as follows:
£'000
Goodwill 188
Other intangible assets 162
Property, plant and equipment 28
Inventories 955
Trade and other receivables 2
Total assets 1,335
Trade and other payables (42)
Deferred tax liability (41)
Provisions (400)
Total liabilities (483)
Net assets 852
Cash consideration 852
Net cash outflow from acquisition 852
Consideration was paid in full during the financial year.
Goodwill of £188,000 is primarily the skills and expertise of HEVAC and HES's
workforce. Goodwill has been allocated to our PSRE division cash generating
unit.
HEVAC and HES contribution to the Group results, post-acquisition are:
£'000
Revenue 2,862
Expenses (2,780)
Profit before exceptional expenses and tax 82
Exceptional and moving expenses (218)
Loss before tax (136)
Tax credit 22
Loss after tax (114)
Exceptional expenses comprise £14,000 relating to the acquisition of HEVAC
and HES, and £204,000 associated with moving the operations to Group premises
in Bradford.
We do not have access to the accounting records prior to the acquisition so
are unable to present the contribution the acquisition to the Group were it to
have been acquired at the start of the financial year.
7 Net cash and gearing
2023 2022
£'000 £'000
Cash 17,717 24,287
Overdrafts (331) (385)
Loans (3,416) (5,874)
Lease liability - finance leases under IAS17 (951) (1,313)
Net cash - excluding IFRS 16 13,019 16,715
Lease liability - under IFRS 16 (3,879) (3,389)
Net cash 9,140 13,326
108,455 105,817
Equity
8.4% 12.6%
Net cash to equity ratio
8 Post balance sheet events
Acquisition of Slack & Parr
On 4(th) August 2023, the Group acquired the trade and assets of Slack &
Parr from Slack & Parr Limited. As at this date control over the business
and its subsidiaries has been obtained.
Slack & Parr is a manufacturer of specialist pumps and a market leading
supplier of high-precision gear metering pumps, hydraulics flow dividers and
industrial pumps.
The Group believes it can utilise its experience in business turnaround as
well as its specialist pump knowledge to improve operational capabilities and
drive higher margin on its revenue contracts.
£2,600,000 cash consideration has been agreed, of which £300,000 is
contingent upon the audited financial statements of overseas subsidiaries. All
consideration will be settled in the next financial year.
In addition to the consideration, the Group has agreed to adopt the lease
arrangements for the business including a lease on their manufacturing
facility and hire purchase agreements on machinery and vehicles.
Overseas subsidiaries acquired:
Name Country of registration Ownership
Slack & Parr (International) Inc USA 100%
S&P Inc USA 100%
S&P Hydraulics Inc USA 100%
S&P Special Products Corp USA 100%
Slack & Parr Shanghai (Joint Venture) China 50%
Slack & Parr Shanghai Manufacturing China 100%
Acquisition of Adaptix
On 15 September 2023, the acquired the remaining 82.0% of the shares in
Adaptix Limited ("Adaptix"), bringing its ownership and voting rights to 100%,
thereby obtaining control.
Adaptix is an Oxford based emerging MedTech Company, specialising in low-dose
3D portable x-ray imaging.
The Group believes that the potential acquisition will give us a market
leading position in novel medical imaging products, as applied to several
markets including veterinary and orthopaedic imaging at the point of care.
Consideration is in the form of newly issued shares in Avingtrans plc, which
at the time of acquisition had a market value of £2,700,000. In addition to
the consideration, the Group has adopted an estimated £2,100,000 of loan
liabilities and repaid £3,300,000 of debt.
9 Preliminary statement and basis of preparation
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 26 September 2023. It is not the Group's statutory
accounts within the meaning of Section 434 of the Companies Act 2006.
The Financial information set out in this announcement does not constitute the
Company's Consolidated Financial Statements for the financial years ended 31
May 2023 or 31 May 2022 but are derived from those Financial Statements.
Statutory Financial Statements for 2022 have been delivered to the Registrar
of Companies and those for 2023 will be delivered following the Company's
AGM. The auditors Cooper Parry Group Limited have reported on the 2023
financial statements. Their report was unqualified, did not draw attention
to any matters by way of emphasis without qualifying their report and did not
contain statements under Section 498(2) or (3) of the Companies Act 2006 in
respect of the Financial Statements for 2023.
The Company's financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the UK and those parts of the Companies Act 2006 that
apply to companies reporting under IFRS. The principal accounting policies
adopted by the company, which remain unchanged, are set out in the statutory
financial statements for the year ended 31 May 2023.
10 Annual report and Accounts
The Report and Accounts for the year ended 31 May 2023 will be available on
the Group's website www.avingtrans.plc.uk on or around 9 October 2023.
Further copies will be available from the Avingtrans' registered office:
Chatteris Business Park, Chatteris, Cambridgeshire PE16 6SA.
11 Annual General Meeting
The Annual General Meeting of the Group will be held at Shakespeare Martineau
LLP, No1 Colmore Square, Birmingham, B4 6AA on 16 November 2023 at 11:00am.
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