REG - Avingtrans PLC - Preliminary results for the year ended 31 May 2024
25/09/2024 07:00
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RNS Number : 5127F Avingtrans PLC 25 September 2024
25 September 2024
Avingtrans Plc
("Avingtrans" or the "Group")
Preliminary results for the year ended 31 May 2024
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 2024.
Financial Highlights
· Revenue from continuing operations increased by 17.3% to a record
£136.6m (2023: £116.4m)
· Gross Margin was stable at 32.2% (2023: 32.9%)
· Adjusted EBITDA from continuing operations was slightly ahead of
the upgraded market expectations at £14.0m (2023: £13.7m), following planned
strategic investments in Adaptix and Magnetica, Underlying Adjusted EBITDA
(excluding acquisitions) was £16.0m
· Adjusted PBT from continuing operations was £7.3m (2023:
£9.0m), excluding acquisitions was £12.0m
· Adjusted Diluted earnings per share from continuing operations
was 18.5p (2023: 23.4p)
· Net Debt (excluding IFRS16) as of 31(st) May 2024 of £6.1m (Net
Cash 31 May 2023: £13.0m)
· Final dividend of 2.9p per share proposed, resulting in a total
dividend of 4.7p per share (2023: 4.5p)
Operational Highlights
Energy (AES)
· Revenue increased by 17.8% to £132.9m (2023 £112.8m)
· Improved result with Adjusted EBITDA up 13.5% to £17.9m (2023:
£15.5m)
· Metalcraft contract to supply the Sellafield 3M3 boxes continues,
in phase two of the programme
· Booth commenced manufacture of HS2 door frames. Aftermarket sales
increasing strongly
· Ormandy records best result since acquisition, following
successful integration of HES/HEVAC in 2023
· Acquisition of the assets of S&P in August 2023 for £4.1m.
S&P records creditable first year result
· Two new nuclear decommissioning contracts won by Metalcraft,
worth £14.5m combined
· HT Luton won £2.5m defence contracts from Rolls Royce and a
further £3.0m from Forsmark
· HT Inc won $10.0m pumps contract from TerraPower, for next
generation nuclear power station
Medical (MII)
· Revenue stable year on year at £3.7m, pending the volume
build-up of new MRI and X-ray products
· As anticipated, LBITDA increased to (£2.8m), vs 2023: (£0.6m)
as MRI and X-ray development projects progress
· Acquisition of the remaining interest in Adaptix for a total
combined consideration of £7.2m, including absorbed and repaid debts
· Magnetica and Adaptix both appointed first US distributor,
Televere Systems
· Strong market pull for both businesses at trade shows, supported
by compelling sales propositions
· Adaptix equipping Scottish facility to manufacture key system
components for Vet and Ortho products
· Magnetica expanded into a bigger factory, to facilitate volume
MRI system production, starting in 2025
· Tecmag moved into improved premises, to gear up for Magnetica and
Adaptix product sales in the USA
· Adaptix commenced sales of Vet products in the UK and USA. Volume
build-up expected in next FY
(1 )Adjusted to add back amortisation of intangibles from business
combinations, acquisition costs and exceptional items
Current Trading & Outlook
· In the quarter since 31 May 2024, the Group has performed in line
with management expectations with the momentum of FY24 continuing into FY25
· The Board remains confident about the current strategic direction
and potential future opportunities across our markets, though we are mindful
of turbulent 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 pleased to present another solid set of results. In many aspects, this
year has been challenging, but Avingtrans has once again performed very well
as a group and exceeded market expectations. During the year, we made prudent
use of our robust balance sheet by purchasing Slack & Parr and Adaptix, to
strengthen our positions in specialist pumps and medical imaging. We also
increased our investment in Magnetica's cutting-edge MRI systems. We have a
strong order book going into FY25, and we anticipate growing as a Group this
year thanks to favourable macro conditions in the energy, infrastructure, and
healthcare sectors."
Enquiries:
Avingtrans plc 0135 469 2391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Broker) 020 7496 3000
Shaun Dobson / Alex Bond / Oliver Platts
IFC Advisory (Financial PR) 0203 934 6630
Graham Herring / Tim Metcalfe / Zach Cohen
Avingtrans business units
Hayward Tyler - Luton & East Kilbride, UK and USA, China and India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Slack and Parr, Kegworth, UK
Focused on the design, manufacture and servicing of advanced precision gear
metering pumps, industrial dosing pumps and hydraulics flow divider solutions.
Energy Steel, Inc - Rochester Hills, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising in: OEM
parts obsolescence; custom fabrications; engineering design solutions; product
refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK
Provider of safety-critical equipment for the energy, medical, science and
research communities, worldwide, specialising in precision pressure and vacuum
vessels and associated fabrications, sub-assemblies and systems.
Booth Industries - Bolton, UK
Designs, manufactures, installs and services doors and walls which can be
tailored to be: blast & explosion proof; fireproof; acoustically shielded;
high security/safety; or combinations of the above.
Ormandy Group, Bradford, UK
Design, manufacturers and servicing of off-site plant, heat exchangers and
other HVAC (heating, ventilation and air conditioning) products.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving customers in
industrial markets.
Magnetica Ltd - Brisbane, Australia
Magnetica Limited specialises in the development of next generation MRI
technologies, including dedicated extremity MRI systems and MRI system
components. Magnetica has successfully built and tested a compact, integrated
3Tesla orthopaedic MRI system, demonstrating clinical-quality imaging.
Commercialisation of this system (and others) is on-going. Magnetica's
structure now includes two other business units:
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and associated
cryogenics for a variety of markets including MRI and provides services for
Nuclear Magnetic Resonance instruments.
Tecmag Inc - Houston, USA
Designs, manufactures and installs instrumentation, including consoles, system
upgrades, and probes, mainly for Magnetic Resonance Imaging (MRI) and Nuclear
Magnetic Resonance (NMR) systems.
Adaptix Ltd, Oxford & Edinburgh, UK
Designs and manufactures novel 3D X-ray systems, with imaging from a
stationary source, at a significantly lower dose than CT. Markets include
orthopaedics, veterinary and non-destructive evaluation.
Avingtrans business units
Hayward Tyler - Luton & East Kilbride, UK and USA, China and India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Slack and Parr, Kegworth, UK
Focused on the design, manufacture and servicing of advanced precision gear
metering pumps, industrial dosing pumps and hydraulics flow divider solutions.
Energy Steel, Inc - Rochester Hills, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising in: OEM
parts obsolescence; custom fabrications; engineering design solutions; product
refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK
Provider of safety-critical equipment for the energy, medical, science and
research communities, worldwide, specialising in precision pressure and vacuum
vessels and associated fabrications, sub-assemblies and systems.
Booth Industries - Bolton, UK
Designs, manufactures, installs and services doors and walls which can be
tailored to be: blast & explosion proof; fireproof; acoustically shielded;
high security/safety; or combinations of the above.
Ormandy Group, Bradford, UK
Design, manufacturers and servicing of off-site plant, heat exchangers and
other HVAC (heating, ventilation and air conditioning) products.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving customers in
industrial markets.
Magnetica Ltd - Brisbane, Australia
Magnetica Limited specialises in the development of next generation MRI
technologies, including dedicated extremity MRI systems and MRI system
components. Magnetica has successfully built and tested a compact, integrated
3 Tesla orthopaedic MRI system, demonstrating clinical-quality imaging.
Commercialisation of this system (and others) is on-going. Magnetica's
structure now includes two other business units:
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and associated
cryogenics for a variety of markets including MRI and provides services for
Nuclear Magnetic Resonance instruments.
Tecmag Inc - Houston, USA
Designs, manufactures and installs instrumentation, including consoles, system
upgrades, and probes, mainly for Magnetic Resonance Imaging (MRI) and Nuclear
Magnetic Resonance (NMR) systems.
Adaptix Ltd, Oxford & Edinburgh, UK
Designs and manufactures novel 3D X-ray systems, with imaging from a
stationary source, at a significantly lower dose than CT. Markets include
orthopaedics, veterinary and non-destructive evaluation.
Chairman's Statement
We are delighted to announce that Avingtrans has performed slightly ahead of
the upgraded (June) expectations in the latest financial year. Revenue was on
target, reaching a record annual result for the Group. EBITDA (note 4) from
continuing operations was ahead of target and the modest Net Debt position was
materially below the expected outcome, post the acquisitions of Slack &
Parr and Adaptix in the period. Encouragingly, Slack & Parr contributed a
positive result to the EBITDA outcome - commendable in its first year - and
losses at Adaptix were lower than forecast. We have a healthy order book as we
move into FY25.
Our Pinpoint-Invest-Exit ("PIE") mantra has been the core of our strategy for
many years. It was again successfully deployed in acquiring the assets of
Slack & Parr for £4.1m. We acquired Slack & Parr, another specialist
pumps and hydraulics manufacturer, to capitalise on its global footprint,
combined with its very well-invested operational capability, renowned brand,
highly skilled workforce and large installed base. In addition, we acquired
the remaining 82% of Adaptix for a total of £7.2m, including acquired and
repaid debts which reinforced our investments in medical imaging. Both
Magnetica and Adaptix continue to make positive progress having developed
disruptive and complementary medical imaging products, particularly for
orthopaedic applications.
In the period, the Group restructured, with the mature engineering businesses
now in one Advanced Engineering Systems (AES) division. We continue to invest
in AES and the results again demonstrate that we are proactively managing
strong progress in this division. Notably, there were record results at Booth
and Ormandy in FY24.
In the Medical and Industrial Imaging (MII) division, the marketing of the 3D
X-ray systems at Adaptix and the development of compact helium-free MRI
systems at Magnetica have made substantial progress in achieving key
milestones in 2024 and beyond. Magnetica's 510k application to the FDA in the
USA has been delayed until 2025, mainly driven by the FDA's vastly increased
cyber-security requirements for imaging systems. These delays result in some
increases to the commercialisation plans and costs for the medical division,
though these costs are partially offset by R&D tax incentives and are
otherwise absorbable. We are very excited by the quality of the imaging
achieved by both MRI and 3-D X-Ray systems and we are receiving very positive
feedback from the market. Across our business we have considerable expertise
in this sector. Our only disappointment of note being the extended US 510K
approval process for MRI.
Nevertheless, our value creation goals are on track, supported by a
conservative approach to debt, which the Board deems to be prudent. We are
optimally structured for future exits that should maximise shareholder value.
Once again, our divisional management teams have demonstrated agility and
resilience, building strong business platforms. Aftermarket growth in AES
remained steady, supporting our value propositions to OEM and end-user
customers. The positive sentiment in the nuclear sector and, to an extent, in
oil and gas resulted in increased orders in those arenas. The focus on
end-user access continues to drive improved profitability and underpins our
product and service development.
The acquisition of Adaptix and our further investment in Magnetica have firmly
established the Medical and Industrial Imaging (MII) division as a new niche
imaging systems supplier, with exciting X-ray and MRI products now well
advanced. The Board is enthusiastic about the division's potential, expecting
long-term, highly positive returns for the Group, albeit perhaps via a
different vehicle, to maximise returns.
In view of the encouraging overall results, the Board is proposing a final
year dividend of 2.9 pence per share, resulting in a total dividend of 4.7p.
With a robust balance sheet, the Group remains vigilant in seeking shareholder
value-enhancing M&A opportunities, while also being cautious and selective
in a still uncertain world.
Finally, I extend my customary appreciation and thanks for all Avingtrans
employees' hard work and for their dedication and resilience in navigating
another challenging, but successfully gratifying year.
Roger McDowell
Chairman
24 September 2024
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"), thanks to 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
uncertainties - 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, Infrastructure and Medical markets,
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
Advanced Engineering Systems (AES): AES 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. In the USA, Hayward
Tyler ("HT") is actively developing solutions for new nuclear technologies and
other low carbon energy sources, like concentrated solar power, to leverage
the global energy supply transition. In the period, HT secured significant
contracts, including additional pumps for the next generation nuclear
business, TerraPower, in the USA and a further life extension equipment for
the Forsmark nuclear power station in Sweden. The HT strategy is strengthened
by crucial partnership agreements with companies like Shinhoo, expanding our
product portfolio and creating cross-selling opportunities. The acquisition of
Slack & Parr further enhances our global specialist pumps footprint.
An important target for AES is to establish a comprehensive offering in the
nuclear decommissioning and waste management 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 valued at up to £70m and is still yet 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 of door frames having commenced
in the period. Ormandy's market position in HVAC has been strengthened by the
HES/HEVAC acquisition in early 2023, with a resulting wider product
proposition. AES continues to benefit from a robust prospect pipeline,
positioning it well to bid for new opportunities as they arise.
Medical and Industrial Imaging (MII): Following the Magnetica acquisition in
2021 and the acquisition of the remaining shares in Adaptix in 2023, the focus
for the highly experienced management teams in 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 and non-destructive evaluation. 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.
Adaptix's 3D X-ray technology is being developed in parallel to Magnetica's
MRI technology and, as we envisioned, the two businesses are working in an
increasingly complementary manner.
Across the Group's customers, we are capitalising on the 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 evergreen Pinpoint-Invest-Exit strategy, Avingtrans
demonstrated its commitment by raising its stake in Magnetica to over 75%
during the period. Additionally, we successfully completed the 100%
acquisition of Adaptix, as mentioned earlier. The Group invested over £11.3m
in Magnetica and Adaptix (post acquisition) in the period, as both businesses
press ahead, to complete the development and commercialisation of their
disruptive imaging products.
Our focus on other strategic acquisitions was sustained, with the addition of
specialist pumps manufacturer Slack & Parr, for a total consideration of
£4.1m which is already contributing positively to Group results, after a
smooth integration process.
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 national governments to
review energy security.
Markets - Energy
The global demand for energy remains relentless and we anticipate sustained
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. The energy hungry deployment of AI and
growth in data centres will further increase world energy consumption. 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 AES
division is 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 waste management. 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 93
reactors generating around 30 percent of the world's nuclear electricity.
Coupled with the heritage Westinghouse technology operating in Europe and
Asia, the 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 AES division is well positioned
to support operators in addressing this critical risk.
The UK remains pre-eminent when it comes to decommissioning nuclear facilities
and subsequent waste management, in terms of innovative technology and overall
spend. The Group is embedded in the future manufacture of waste containers for
Sellafield and NRS (formerly Magnox) 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 AES
division. 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 and Eastern
Europe. AES has optimised 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 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
relatively 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 $55.4billion by 2030 according to Grand
View Research, a compound annual growth rate of 4.9%. 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
2021, we merged Magnetica with Scientific Magnetics (UK) and Tecmag (US) and
we have continued to invest in Magnetica. In the period, we acquired 100% of
Adaptix, for £7.2m, including absorbed and repaid debt. 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
suppliers, 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, the rising incidence
of chronic diseases and increasing companion animal ownership.
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 2024, 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 is important to note that the
actual addressable market is likely 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, for imaging at the
point of care.
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. Notably, our strategy is to attack the
markets in smaller "point-of-care" locations, where the main players (eg GE)
are not present, since they are generally focused on whole body systems
located in hospitals. Additionally, our systems are designed to eliminate
circa 90% of the infrastructure costs, which severely limit where whole body
systems can be sited.
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.
Infrastructure and Security
Global safety and security concerns, as well as risk mitigation on large
infrastructure projects, are key drivers for growth at Booth and we are
cultivating these opportunities carefully. Thus far, the vast majority of
Booth's sales are in the UK but the business is building up a prospect
pipeline overseas. We have also continued to build the aftermarket order book,
with good prospects.
Threat detection standards for baggage handling at airports and package
scanning have been tightened everywhere around the world - especially in
Europe and the USA. With many millions of bags and packages flowing across
border crossings every day, screening devices have to comply with threat
detection standards without impacting throughput. Rapiscan, the biggest
customer for Composite Products, is a market leader in this sector, whose
presence is increasing as new standards are rolled out.
Following the acquisition of Adaptix, we are exploring various possible
security applications of their 3D X-ray technology products as tools in
various Non-Destructive Evaluation (NDE) markets, with an estimated
addressable market of c$1.4bn.
Operations
Operational Key Performance Indicators (KPI's) for continuing operations
2024 2023
· Percentage of total continuing revenue deriving from aftermarket (AM) sales 38.2 39.5
(%)
· Customer quality - defect free deliveries (%) 89.0 91.3
· Customer on-time in-full deliveries (%) 73.6 79.9
· Annualised staff turnover including restructuring (%) 15.8 18.5
· Health and Safety incidents per head per annum 0.07 0.08
· Environmental incidents per annum 0 0
Aftermarket sales increased in value by £6.2m (13.4%) however there was a
strong return of OE Revenue during FY24, reducing the overall AM percentage of
sales.
The defect free delivery percentage decreased in FY24 to 89.0% (2023: 91.3%).
The percentage is typically linked to the stage/type on some of the key
contracts. In FY23, we were primarily engaged in the developing of new
designs, which have transitioned to production during FY24.
Customer quality and on time in full (OTIF) deliveries both reduced in FY24,
mainly due to the initial poor performance at Slack & Parr, following its
administration process, leading to operational challenges, including supply
chain disruptions and internal restructuring, which affected our ability to
deliver products on schedule. Performance since acquisition has shown steady
improvement.
Annualised staff turnover fell to 15.8% in FY24 (FY23: 18.5%), mainly driven
by a reduced number of employees taking retirement (FY24: 6, FY23: 22).
H&S incidents per head per annum was down very slightly at 0.07.
As in 2023, there were zero environmental incidents recorded in the Group.
AES Division - Energy and Infrastructure
The AES division comprises: Hayward Tyler (HT), Energy Steel (ES), Booth,
Metalcraft, Ormandy and Composite Products, with Slack & Parr being added
in the period.
The division's results were materially improved in the period, both for OE and
aftermarket sales.
For Hayward Tyler ("HT"), the main priorities remain to strengthen its
aftermarket capabilities and to maximise opportunities in the nuclear life
extension market. HT was able to deliver a robust result in the period, the
best outcome since acquisition, with a strong order book and prospects for the
year ahead.
At HT Luton, aftermarket activities remain the focus, including the servicing
of third-party equipment. A follow on £3m contract in Sweden with Vattenfall
for the Forsmark plant (for nuclear life extension) commenced in the period.
Further defence orders have also been received from Rolls Royce and are being
executed as planned. Hydrocarbon related orders from the UK North Sea sector
remained steady.
Regarding the HT Luton site redevelopment, there has been limited recent
progress, as the increase in interest rates in the UK has dampened
construction interest for the time being. Therefore, we have currently paused
the sale of the site.
The HT Fluid Handling business in Scotland has been a consistently good
performer and has fitted well into our ambitions to build a wider nuclear
capability. The business has maintained a strong order book and the Transkem
industrial mixers product line has again contributed positively.
HT Inc in Vermont (USA) continues to see solid order intake in the nuclear
life extension market in the USA. HT Inc's new R&D opportunities in next
generation nuclear power have made good progress, with a further $10m design
and development TerraPower contract booked in the period and progressing to
plan.
HT Kunshan (China) has developed a healthy order book, including an improving
position in the aftermarket business, with new orders coming from Chinese
electricity producers working on reducing the environmental impact of
electricity production.
In India, the local team again delivered a solid annual performance, as
India's energy requirements continue to expand.
Energy Steel ('ES') in Michigan (USA) made headway in the period, though the
business did suffer from various order delays in orders, which impacted
performance this year.
Metalcraft has made good progress with Phase 2 of the Sellafield 3M3
("three-cubic-metres") box contract and confirmed additional nuclear
decommissioning orders of over £14m in the period, including the first
contract from NRS (formerly Magnox). The next follow-on 3M3 box contract
tender, expected to be worth over £900m, is expected to be tendered in 2025
by Sellafield. The apprentice training centre in Chatteris continues to build
momentum.
Ormandy achieved a record performance in the period, with a robust order book,
moving into FY25. Ormandy has made excellent progress in building its
aftermarket business, with aftermarket now comprising 13% of revenue.
Booth Industries maintained its strong growth trajectory. Booth has a record
order book, including the £36m order for HS2 cross-tunnel doors, which was
not affected by the HS2 phase 2 cancellation. The business completed and
installed the giant proscenium doors for "The Factory" entertainment venue -
the biggest doors ever made by Booth. We continue to make good progress in
building an aftermarket business at Booth, where we see strong growth
potential.
Composite Products had a solid year, boosted by new orders from Rapiscan.
Slack & Parr made a positive start to life within the Group and,
pleasingly, was able to deliver a modest profit at EBIT in its first year with
Avingtrans - a commendable outcome. Their specialist gear metering pumps are
sought after worldwide, for a variety of applications, including the precision
production of high-end fibres - eg spandex.
MII - Medical Division: Magnetica and Adaptix
Magnetica, Scientific Magnetics (SciMag) and Tecmag are working effectively
together to make good progress on our exciting development of compact,
superconducting, helium-free MRI systems entirely in-house. Magnetica was able
to exhibit its prototype system in the period and the FDA 510(k) approval is
now anticipated in H1 2025. The delay is mainly due to significantly increased
demands by the FDA regarding cyber security. The business also appointed its
first US distributor, Televere Systems, in the period.
Our initial estimate of the addressable MRI orthopaedic imaging market is
circa £1.7bn p.a. (by 2030). This is assuming a capital sale model. Our
intended longer term "pay per scan" business model could mean that the
opportunity is significantly larger. It is more difficult to quantify other
potential market segments (e.g. veterinary imaging) at this stage because
equivalent, dedicated products do not exist. Avingtrans has further increased
its investment in Magnetica, bringing its shareholding to over 75% of the
issued share capital. We believe that materially reducing the size and total
costs of these dedicated MRI systems, coupled with them being much easier to
set up in a variety of locations, as well as increasing the scan rate by up to
300%, will produce a compelling sales proposition, ratified by interest from
Key Opinion Leaders at the prestigious Radiological Society of North America
conference, in Chicago. In addition, these dedicated systems could free-up
capacity on the existing MRI system installed base, which should be a major
benefit to healthcare organisations.
SciMag and Tecmag will rebrand in due course, to present a seamless image for
the business. However, there is still merit in continuing with various
existing products and services at SciMag and Tecmag, so long as they do not
detract from our core vision for MRI, which holds out the prospect of
materially increasing the value of Magnetica over the coming years. Orders for
existing SciMag and Tecmag products were solid in the period.
As noted above, Avingtrans acquired the remaining 82% of the share capital of
Adaptix, Oxford, UK in 2023. Adaptix launched its compact 3D x-ray system for
orthopaedics in the USA. Adaptix has also launched its veterinary version of
the 3D x-ray product and initial orders for a non-destructive evaluation (NDE)
product were also booked in the period. We estimate that the Total Addressable
Market value of these three segments is $6.8bn pa. Adaptix also appointed
Televere Systems as its first US distributor.
The strategies of Magnetica and Adaptix are convergent and we see potentially
large benefits in combining their approaches to market in technology, software
and distribution channels, amongst others.
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").
Revenue: 17.3% increase - underlying organic growth continues
Group continuing revenue increased to £136.6m (2023: £116.4m), with organic
growth of 9% in the AES division. Revenue included £10.3m from Slack &
Parr and Adaptix, both acquired in the period.
Gross margin: Stable despite some OEM/AM mix effects in the year
Group gross margin reduced slightly to 32.2% (2022: 32.9%) partly due to the
relatively higher percentage of OEM sales in the year, versus FY23.
Profit margin: Ahead of expectations
Adjusted EBITDA (note 2) increased to £14.0m (2023: £13.7m). The result was
better than expected, given the forecast investment in the MII division. AES
recorded robust results across the division, which boosted the overall Group
performance. Slack & Parr recorded a creditable, albeit small, positive
EBIT result in its first year with the Group.
Operating profit was £5.6m (2023: £8.0m), predominately due to £3.7m EBIT
loss at Adaptix and higher exceptional costs for acquisition and restructuring
offsetting an 8% increase in AES.
Tax: Future profits and cash protected by available losses
The effective rate of taxation at Group level was a 24.4% (2023: 16.7%) tax
charge. The utilisation of brought forward tax losses in the UK (note 3) kept
the charge lower than expected. The tax position will be aided further in the
coming years by utilisation of losses in the UK and US. We continue to be
cautious, not recognising all of the potential trading tax losses in the UK.
Adjusted diluted Earnings per Share (EPS) reduced due to investments in the
Medical division
Adjusted diluted earnings per share from continuing operations (note 4)
decreased to 18.5p (2023: 23.4p) reflecting the investment in Medical and
higher tax charge offsetting underlying growth in AES results. Adjusted
diluted earnings per share attributable to shareholders reduced to 18.5p
(2023: 19.9p), with FY23 including 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 11.1p (2023: 15.7p) and to 10.9p (2023:
15.3p), as above, due to the investment in Medical and higher tax charge
offsetting underlying growth in AES results.
Funding and Liquidity: Modest net debt position, post recent acquisitions
Net debt (including IFRS16 debt) at 31 May 2024 was £11.8m. Excluding IFRS16
debt, Net debt was £6.1m, (31 May 2023: Net cash (including IFRS16 debt) was
£9.1m and excluding IFRS16 debt was £13.0m). The cash flows generated from
the strong underlying profits were subdued by a £9.0m working capital
outflow, due to the delayed timing of various contracts, working capital
outflow for the S&P and Adaptix acquisitions and increased revenue in AES,
resulting in an operating cash inflow of £1.3m for the year (2023: £9.6m).
As expected, there was significant investment in product development during
the period with £8.4m invested, primarily in relation to Magnetica's compact
helium-free MRI system £3.6m, Adaptix's disruptive 3D X-ray technology £2.4m
and next generation nuclear pumps at HTI £1.8m. A further £4.0m was
invested into property plant and equipment, £0.8m lease renewals at Tecmag,
manufacturing set up at Adaptix £0.9m, alongside the initial net £1.5m cash
cost of the acquisitions. To support the significant investment in the
business, the group drew down £7.7m net of repayments from its supportive
banking partners (including new lease at Tecmag £0.7m), leaving the Group in
a strong position to pursue its strategy. The Directors consider that the
Group has sufficient financial resources to deliver its strategy, so the Group
continues to actively look for further value enhancing opportunities.
Dividend: Progressive dividend policy continues
A final dividend of 2.9p per share is proposed, making a total dividend of
4.7p per share (2023: 4.5p). The dividend will be paid on 20 December 2024, to
shareholders on the register at 8 November 2024.
People
There were no personnel changes at Board level. However, at Board level, we
have now set up an ESG Committee, chaired by Jo Reedman.
At divisional management level, we merged the EPM and PSRE divisions to create
the AES division. Consequently, Austen Adams, formerly the managing director
of the PSRE division, assumed leadership of this newly integrated division.
The Board would like to extend its sincere best wishes and gratitude to Mike
Turmelle, the former head of the EPM division, who has stepped down from his
role and left the Company. His contributions during his tenure at Avingtrans
are highly appreciated.
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 four
pillars of this regime are governance, strategy, metrics and targets, and risk
management.
Governance
During the financial year, the Group established an ESG Committee. The main
responsibilities of the ESG committee are to:
· Assist the Board in defining and regularly reviewing Avingtrans'
ESG strategy.
· Oversee the setting of objectives and KPIs for ESG matters and
ensure that key metrics are reported on.
· Develop and review regularly the policies, practices, targets and
initiatives relating to ESG activities, ensuring they remain effective and up
to date and consistent with good industry practice.
· Provide oversight of Avingtrans' management of ESG matters and
its compliance with relevant legal and regulatory requirements, including
applicable rules and principles of corporate governance, and applicable
industry standards.
· Report on these matters to the Board and, where appropriate, make
recommendations to the Board.
· Report as required to the shareholders of the Company on the
activities and remit of the Committee.
Jo Reedman (Non-Executive Director) is Chair of the ESG committee, which meets
on a quarterly basis.
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 two 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
division operating in the energy sector (AES) we monitor carbon emissions per
£m of revenue. The Medical division (MII) 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:
2024 2023
AES MII Group AES MII Group
Scope 1:
Gas 715 38 753 623 21 643
Oil 427 - 427 386 - 386
Distribution 27 1 28 16 2 18
Company vehicle travel 20 - 20 15 15
1,190 39 1,229 1,040 23 1,062
Scope 2 - Purchased electricity 1,307 230 1,537 843 203 1,046
Total emissions tCO2e 2,497 269 2,766 1,882 226 2,108
Total energy consumption mWh 11,684 755 12,439 9,459 544 10,003
Intensity metrics:
Average employees 840 93 941 673 59 732
Emissions tCO2e per employee 3.0 2.9 2.9 2.8 3.8 2.9
Revenue (£m) 132.9 3.7 136.6 112.8 3.6 116.4
Emissions tCO2e per £m of revenue 18.8 73.1 20.2 16.7 62.2 18.1
UK proportion of:
Total emissions tCO2e 81% 34% 76% 79% 21% 73%
Total energy consumption mWh 81% 59% 80% 77% 46% 75%
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 AES division division's intensity target is to reduce its tCO2e per £m of
revenue. The figures above include the Slack & Parr business which was
acquired during the financial year. Presenting on a like for like basis:
2024 2023 Movement Movement %
Total emissions tCO2e 2,001 1,882 119 6%
Revenue 122.9 112.8 10 9%
Emissions tCO2e per £m of revenue 16.3 16.7 (0.4) (2%)
On a LFL basis the Group has delivered a 2% improvement Emissions tCO2e per
£m of revenue. This improvement has been delivered through a combination of
energy reduction initiatives, and delivery of an increased revenue without the
need to expand our manufacturing footprint.
The MII division's intensity target is to reduce its tCO2e per employee. In
the year tCO2e per employee has reduced to 2.9 (2023: 3.8).
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.
Nuclear energy and decommissioning represent 23% 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 and the USA, 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 rolled-out "dignity and respect" training programs 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 2024, the Group had 32 apprentices
in the UK.
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 9). Health and Safety incidents per head per
annum fell to 0.07 in the year (2023: 0.08). There were 68 incidents in the
year requiring first aid or hospital attention. Excluding the new acquisition
incidents per head per annum would have remained flat at 0.08. 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 tried and tested '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 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 both of its divisions, with a particular
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 progressing well, albeit delayed by additional FDA
requirements. The expected launch of the orthopaedic product is now
anticipated in the first half of 2025, subject to FDA approval in the USA.
This activity is fully complemented by the acquisition of Adaptix and its
disruptive 3D X-ray technology, with products addressing the orthopaedic,
veterinary and non-destructive evaluation markets. The Slack & Parr
acquisition is progressing well and we anticipate a strong recovery in profit
there over the next two years. As anticipated, the Group is now in a modest
net debt position, following recent acquisitions. Our value creation targets
continue to be accomplished as planned and are underpinned by our conservative
approach to debt.
The AES division has a strong emphasis on the thermal power, nuclear and
hydrocarbon markets and aftermarkets. The MII 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 is still a risk factor. However, we have taken
effective cost and impact mitigation actions, to limit any potential downside
and we will continue to be vigilant.
Despite the on-going global macroeconomic uncertainty, 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
24 September 2024 24 September 2024 24 September 2024
Consolidated Income Statement
Note 2024 2023
£'000 £'000
Revenue 1 136,615 116,437
Cost of sales (92,573) (78,137)
44,042 38,300
Gross profit
Distribution costs (3,663) (4,458)
Administrative expenses (34,743) (25,866)
8,167 9,452
Operating profit before amortisation of acquired intangibles, other
non-underlying items and exceptional items
Amortisation of acquired intangibles (819) (993)
Share based payment (324) (237)
Acquisition costs (347) (14)
Restructuring costs (1,041) (232)
Operating profit 1 5,636 7,976
Finance income 364 109
Finance costs (1,175) (609)
4,825 7,476
Profit before taxation
Taxation 3 (1,180) (1,246)
Profit after taxation from continuing operations 3,645 6,230
Profit after taxation from discontinued operations - (1,168)
Profit for the financial year 3,645 5,062
Profit is attributable to:
Owners of Avingtrans PLC 3,662 5,194
Non-controlling interest (17) (132)
Total 3,645 5,062
Earnings per share:
From continuing operations
-Basic 4 11.1p 19.4p
-Diluted 4 10.9p 18.9p
From continuing and discontinuing operations
-Basic 4 11.1p 15.7p
-Diluted 4 10.9p 15.3p
Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income
2024 2023
£'000 £'000
Profit for the year 3,645 5,062
Items that will not subsequently be reclassified to profit or loss
Remeasurement of defined benefit asset (493) (1,388)
Income tax relating to items not reclassified 123 347
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations (667) (579)
2,608 3,442
Total comprehensive income for the year attributable to equity shareholders
Consolidated Balance Sheet
Note 2024 2023
£'000 £'000
Non current assets
Goodwill 27,874 21,585
Other intangible assets 33,647 18,790
Property, plant and equipment 29,611 23,612
Deferred tax 3,718 666
Unlisted Investments - 8,000
Pension and other employee obligations 84 526
94,934 73,179
Current assets
Inventories 19,871 12,656
Trade and other receivables: falling due within one year 57,098 49,691
Trade and other receivables: falling due after one year 1,394 1,550
Current tax asset 927 618
Cash and cash equivalents 12,115 17,717
91,405 82,232
Total assets 186,339 155,411
Current liabilities
Trade and other payables (39,432) (32,140)
Lease liabilities (2,855) (1,503)
Borrowings (5,176) (3,077)
Current tax liabilities (823) (1,303)
Provisions (1,813) (1,315)
Derivatives - (15)
Total current liabilities (50,099) (39,353)
Non-current liabilities
Borrowings (8,726) (669)
Lease liabilities (7,200) (3,328)
Deferred tax (6,972) (3,238)
Other creditors (328) (368)
Total non-current liabilities (23,226) (7,603)
Total liabilities (73,325) (46,956)
Net assets 113,014 108,455
Equity
Share capital 1,654 1,612
Share premium account 19,005 15,979
Capital redemption reserve 1,299 1,299
Translation reserve 913 1,170
Merger reserve 28,949 28,949
Other reserves 1,457 1,457
Investment in own shares (4,235) (4,235)
Retained earnings 61,402 59,811
Total equity attributable to equity holders of the parent 110,444 106,042
Non-controlling interest 2,570 2,413
Total equity 113,014 108,455
Consolidated Statement of Changes in Equity
at 31 May 2024
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 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 - - - - - - (803)
(1,094) (803)
Profit for the year - - - - - - - 5,194 5,194 (132) 5,062
Investment in subsidiary with non-controlling interest - - - - 924 - - 546 -
(1,470) (546)
Other comprehensive income
Actuarial gain for the year on pension scheme - - - - - - - (1,388) (1,338) - (1,338)
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 statement of changes in equity (continued)
at 31 May 2024
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 2023 1,612 15,979 1,299 28,949 1,170 1,457 (4,235) 59,812 106,043 2,413 108,455
Ordinary shares issued 42 3,026 - - - - - - 3,068 - 3,068
Dividends paid - - - - - - - (1,441) (1,441) - (1,441)
Share-based payments - - - - - - - 324 324 - 324
Total transactions with owners 42 3,026 - - - - - (1,117) 1,951 - 1,951
Profit for the year - - - - - - - 3,662 3,662 (17) 3,645
Investment in subsidiary with non-controlling interest - - - - 410 - - (585) (175) 175 -
Other comprehensive income
Actuarial gain for the year on pension scheme - - - - - - - (493) (493) (493)
-
Deferred tax on actuarial movement on pension scheme - - - - - - - 123 123 123
-
Exchange gain - - - - (667) - - - (667) - (667)
Total comprehensive income for the year - - - - (257) - - 2,707 2,450 158 2,608
Balance at 1,654 19,005 1,299 28,949 913 1,457 (4,235) 61,402 110,444 2,570 113,014
31 May 2024
Consolidated Cash Flow Statement for the year ended 31 May 2024 Note
2024 2023
£'000 £'000
Operating activities
Cash flows from operating activities 5 3,604 10,682
Finance costs paid (1,294) (620)
Income tax paid (952) (331)
Contributions to defined benefit plan (24) (164)
Net cash inflow from operating activities 1,334 9,567
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 6 (1,548) (852)
Investment in unlisted undertaking - (4,000)
Disposal of a subsidiary undertaking, net of cash disposed - 877
Finance income 364 109
Purchase of intangible assets (8,430) (5,401)
Purchase of property, plant and equipment (3,967) (3,291)
Proceeds from sale of property, plant and equipment 4 34
Net cash used in from investing activities (13,577) (12,524)
Financing activities
Equity dividends paid (1,441) (1,331)
Repayments of bank loans (3,213) (2,843)
Repayment of leases (3,863) (1,771)
Proceeds from issue of ordinary shares 563 291
Proceeds from borrowings 14,734 2,254
Net cash inflow/(outflow) from financing activities 6,780 (3,400)
Net decrease in cash and cash equivalents (5,463) (6,356)
Cash and cash equivalents at beginning of year 17,386 23,902
Effect of foreign exchange rate changes on cash (130) (160)
Cash and cash equivalents at end of year 11,793 17,386
Notes
1 Segmental analysis
Year ended 31 May 2024 Energy Medical Unallocated Total
AES MII central items
£'000 £'000 £'000 £'000
Original Equipment 81,044 3,322 - 84,336
After Market 51,893 356 - 52,249
Revenue 132,937 3,678 - 136,615
Operating profit/(loss) 10,961 (3,990) (1,335) 5,636
Net finance (expense)/income (968) (78) 235 (811)
Taxation (charge)/credit (1,350) 291 (121) (1,180)
Profit/(loss) after tax from continuing operations 8,643 (3,777) (1,221) 3,645
Segment non-current assets 60,771 34,163 - 94,934
Segment current assets 79,798 4,913 6,694 91,405
140,569 39,076 6,694 186,339
Segment liabilities (71,163) (19,763) 17,602 (73,324)
Net assets 69,406 19,313 24,296 113,014
Non-current asset additions
Intangible assets 2,220 6,210 - 8,430
Tangible assets 4,277 1,720 - 5,997
6,497 7,930 - 14,427
Other income statement items: (4,741) (1,114) - (5,855)
Depreciation and amortisation
Unallocated assets/ (liabilities) consist primarily of interest-bearing assets
and liabilities and income tax assets and liabilities.
Year ended 31 May 2023 Energy Medical Unallocated Total
AES MII central items
£'000 £'000 £'000 £'000
Original Equipment 66,802 3,595 - 70,397
After Market 46,006 34 - 46,040
Revenue 112,808 3,629 - 116,437
Operating profit/(loss) 10,145 (1,010) (1,159) 7,976
Net finance (expense)/income (496) (39) 35 (500)
Taxation (charge)/credit (1,311) (17) 82 (1,246)
Profit/ (loss) after tax from continuing operations 8,338 (1,066) (1,042) 6,230
Segment non-current assets 54,136 11,043 8,000 73,179
Segment current assets 71,928 2,544 7,760 82,242
126,064 13,597 15,760 155,411
Segment liabilities (42,534) (4,073) (349) (46,956)
Net assets 83,530 9,524 15,411 108,455
Non-current asset additions
Intangible assets 1,714 3,848 - 5,562
Tangible assets 2,821 470 - 3,291
4,535 4,318 - 8,853
Other income statement items:
Depreciation and amortisation (3,980) (314) - (4,294)
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:
2024 2023 2024 2023
Revenue Non-current Non-current
Revenue Assets Assets
£'000 £'000 £'000 £'000
United Kingdom 60,851 53,076 37,454 34,954
Europe (excl. UK) 7,011 7,411 - -
United States of America 35,615 28,955 40,680 27,473
Africa & Middle East 6,031 2,705 - -
Americas & Caribbean (excl. USA) 3,501 5,059 - -
China 16,979 10,297 595 723
Asia Pacific (excl. China) 6,627 8,934 12,404 8,837
136,615 116,437 91,133 71,987
2 Adjusted Earnings before interest, tax, depreciation and
amortisation
2024 2023
£'000 £'000
Profit before tax from continuing operations 4,825 7,476
Share based payment expense 324 237
Acquisition costs 347 14
Restructuring costs 1,041 232
(Gain)/loss on derivatives (15) 14
Amortisation of intangibles from business combinations 819 993
Adjusted profit before tax from continuing operations 7,341 8,966
Finance income (364) (109)
Finance cost 1,175 609
Gain/(loss) on derivatives 15 (14)
Adjusted profit before interest, tax and amortisation from business 8,167 9,452
combinations ('EBITA')
Depreciation 4,817 3,720
Amortisation of other intangible assets 904 444
Amortisation of contract assets 137 130
Adjusted Earnings before interest, tax, depreciation and amortisation 14,025 13,746
('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
2024 2023
£'000 £'000
Continuing operations
Current tax
Corporation tax - current year - -
Corporation tax - prior year 219 77
Overseas tax - current year 418 970
Overseas tax - prior year (275) 210
Total current tax 362 1,257
Deferred tax
Deferred tax - current year 479 (15)
Deferred tax - prior year 339 4
Deferred tax - rate - -
Total deferred tax 818 (11)
Tax charge on continuing operations 1,180 1,246
Tax (credit)/charge on discontinued operations - -
Total tax charge in the year 1,180 1,246
Corporation tax is calculated at 25% (2023: 20%) 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.
2024 2023
Number Number
Weighted average number of shares - basic 32,733,107 32,187,135
Share option adjustment 628,002 820,074
Weighted average number of shares - diluted 33,361,109 33,007,209
2024 2023
£'000 £'000
Profit from continuing operations 3,645 6,230
Share based payment expense 324 237
Acquisition costs 347 14
Restructuring costs 1,032 232
Other exceptionals 9 -
(Gain)/loss on derivatives (15) 14
Amortisation of intangibles from business combinations 819 993
Adjusted profit after tax from continuing operations 6,161 7,720
From continuing operations:
Basic earnings per share 11.1p 19.4p
Adjusted basic earnings per share 18.8p 24.0p
Diluted earnings per share 10.9p 18.9p
Adjusted diluted earnings per share 18.5p 23.4p
Earnings from discontinuing operations: - (1,168)
From discontinuing operations
Basic earnings per share - (3.6)p
Adjusted basic earnings per share - (3.6)p
Diluted earnings per share - (3.5)p
Adjusted diluted earnings per share - (3.5)p
Earnings attributable to shareholders including non-controlling interest 3,645 5,062
Basic earnings per share 11.1p 15.7p
Adjusted basic earnings per share 18.8p 20.4p
Diluted earnings per share 10.9p 15.3p
Adjusted diluted earnings per share 18.5p 19.9p
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.
At 31 May 2024, we have excluded 1,700,000 share options from the diluted EPS
calculation (2023: Nil) as these options are not expected to vest, given that
the exercise price exceeds the market price.
5 Notes to the consolidated cash flow statement
Cash flows from operating activities:
2024 2023
£'000 £'000
Continuing operations
Profit before income tax from continuing operations 4,825 7,475
Loss before income tax from discontinuing operations before disposal - (616)
Adjustments for:
Depreciation 4,817 3,720
Amortisation of intangible assets 904 444
Amortisation of intangibles from business combinations 819 993
Loss on disposal of property, plant and equipment 23 -
Loss on disposal of intangible assets - 373
Finance income (364) (109)
Finance expenses 1,175 609
Share based payment charge 324 237
Changes in working capital
Increase in inventories (4,818) (729)
Increase in trade and other receivables (8,003) (3,628)
Increase in trade and other payables 3,825 2,814
Increase/(decrease) in provisions 107 (857)
Other non cash changes (30) (44)
Cash flows from operating activities 3,604 10,682
2024 2023
£'000 £'000
Cash and cash equivalents
Cash 12,115 17,717
Overdrafts (322) (331)
11,793 17,386
6 Acquisitions and disposals
Acquisition of Slack and Parr Limited
On the 6 August 2023, Hayward Tyler Fluid Handling Limited, a subsidiary of
Avingtrans, completed the acquisition of the trade and assets of Slack and
Parr Limited, along with its overseas subsidiaries in the USA and China.
Slack and Parr is renowned for its specialism in manufacturing high-precision
gear metering pumps, hydraulics flow dividers, and industrial pumps, is a
market leading supplier catering to a global customer base.
This strategic acquisition enhances Hayward Tyler's existing businesses by
introducing additional products, expanding market reach, and in bringing in
valuable expertise and equipment from Slack and Parr.
£'000
Cash consideration 1,867
Total consideration 1,867
Consideration was transferred in stages. All consideration has been paid by 31
May 2024.
The provisional assets and liabilities recognised as a result of acquisition
were as follows:
£'000
Property, plant and equipment 5,209
Inventories 2,005
Trade and other receivables 399
Current tax asset 8
Cash 164
Trade and other payables (1,599)
Provisions (206)
Amounts owing to group undertakings (481)
Lease liabilities (related to plant and equipment acquired and property lease) (3,686)
Net identifiable assets acquired 1,812
Goodwill 55
Consideration 1,867
Amounts owing to group undertakings represents loans issued from Hayward Tyler
Fluid Handling at the point of acquisition.
Goodwill is attributable to Slack and Parr's workforce, brand and future
growth potential, plus synergies with our existing Hayward Tyler businesses.
The acquired business contributed revenues of £10,025,000 and a net loss of
£144,000 to the Group for the period ended 31 May 2024.
Cashflow
£'000
Outflow of cash to acquire subsidiary:
Cash consideration paid in the period 1,867
Cash acquired (164)
Net cash outflow from investing activities 1,703
Acquisition related costs of £201,000 have been presented as exceptional
costs in the income statement and in operating cashflows in the statement of
cashflows.
Acquisition of Adaptix Limited
On 15 September 2023, the Group acquired the remaining 82% of Adaptix
Limited's ("Adaptix") share capital, thereby gaining control. In exchange for
the 82% of shares in Adaptix, Avingtrans issued shares valued at £2,505,000
on the date of acquisition. Immediately prior to the acquisition, the Group
held an 18% shareholding in Adaptix, which was purchased for cash
consideration of £6,005,000.
Adaptix are an emerging Medtech business, developing 3D x-ray technologies.
The product launch plans of Adaptix align with the Group's Magnetica business,
which is developing compact magnetic resonance imaging technology. This
alignment enables both businesses to mutually benefit by coordinating their
commercialization activities.
Consideration has been calculated using the accumulated cost method, and
comprises:
£'000
Cash consideration 6,005
Issued shares 2,505
Total purchase consideration 8,510
The fair value of the 642,355 issued shares was based on the published closing
share price on the 15(th) September 2023 of 390 pence per share.
The provisional assets and liabilities recognised as a result of acquisition
were as follows:
£'000
Other intangible assets: technology 8,219
Property, plant and equipment 1,883
Inventories 323
Trade and other receivables 567
Current tax asset 701
Cash 152
Trade and other payables (1,931)
Amounts owing to group undertakings (3,299)
Provisions (157)
Lease liabilities (626)
Borrowings (3,563)
Net identifiable assets acquired 2,268
Goodwill 6,242
Consideration 8,510
Amounts owing to group undertakings represents loans issued to Adaptix prior
to the acquisition.
Goodwill is attributable to Adaptix's workforce and future growth potential,
plus synergies with our existing medical imaging businesses.
The acquired business contributed revenues of £244,000 and a net loss of
£4,507,000 to the Group for the period ended 31 May 2024.
Cashflow
£'000
Inflow of cash to acquire subsidiary:
Cash consideration paid in the period -
Cash acquired 152
Net cash inflow from investing activities 152
All cash consideration paid for Adaptix was transferred in previous accounting
periods, so does not impact the current period cashflow.
Acquisition related costs of £147,000 have been presented as exceptional
costs in the income statement and in operating cashflows in the statement of
cashflows.
7 Net (debt)/cash and gearing
2024 2023
£'000 £'000
Cash 12,115 17,717
Overdrafts (322) (331)
Loans (13,581) (3,416)
Lease liability - finance leases under IAS17 (4,293) (951)
Net (debt)/cash - excluding IFRS 16 (6,081) 13,019
Lease liability - under IFRS 16 (5,762) (3,879)
Net (debt)/cash (11,843) 9,140
113,014 108,455
Equity
(10.5)% 8.4%
Net (debt)/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 24 September 2024. 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 2024 or 31 May 2023 but are derived from those Financial Statements.
Statutory Financial Statements for 2023 have been delivered to the Registrar
of Companies and those for 2024 will be delivered following the Company's
AGM. The auditors Cooper Parry Group Limited have reported on the 2024
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 2024.
9 Annual report and Accounts
The Report and Accounts for the year ended 31 May 2024 will be available on
the Group's website www.avingtrans.plc.uk on or around 11 October 2024.
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 19 November 2024 at 11:00am.
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