TIDMAVG
RNS Number : 6740M
Avingtrans PLC
18 September 2019
Avingtrans plc
("Avingtrans" or the "Group")
Preliminary Results for the year ended 31 May 2019
Avingtrans plc, 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 twelve months ended 31 May
2019.
Financial Highlights
-- Revenue from continuing operations increased by 34% to GBP105.5m (2018(1) : GBP78.9m)
o Reflecting the full year impact of FY18 HTG acquisition and
11% underlying organic growth
-- Gross Margin improved to 26.7% (2018(1) : 25.5%)
-- Adjusted(2) EBITDA from continuing operations increased by
65% to GBP9.4m (2018(1) : GBP5.7m)
-- Adjusted(2) PBT GBP5.3m (2018(1) : GBP2.4m)
-- Adjusted(2) Diluted earnings per share were boosted to 14.9p (2018(1) : 8.4p)
-- Cash inflow from operating activities GBP9.0m (2018: GBP6.9m outflow)
-- Net Debt GBP2.0m (31 May 2018: GBP7.1m)
-- Increased final dividend of 2.4p per share (2018: 2.3p). Full year 3.8p (2018: 3.6p)
(1) 2018 not restated for IFRS15
(2) Adjusted to add back amortisation of intangibles from
business combinations, acquisition costs and exceptional items
Operational Highlights
Energy
-- Revenues up 36% to GBP93.4m (2018: GBP68.4m) including first full year of HTG results
-- Ormandy acquisition made a profit in its first full year
-- Acquisitions of Booth and Energy Steel post-period end are proceeding to plan
-- Sella eld 3M3 boxes now in serial production
-- GBP10m nuclear life extension contract with Vattenfall for Forsmark
-- GBP10m steam turbine contract for floating production vessel
-- Exited Whiteley Read and Maloney sites, to rationalise oil and gas assets
-- New Hayward Tyler Chinese factory in Kunshan (China) fully operational
-- Aftermarket performance continuing to improve across all business units
Medical
-- Revenues up to GBP12.1m (2018: GBP10.4m), transition to new markets continues
-- Acquisition of Tecmag Inc, for GBP0.1m including costs, providing system capability
-- Scientific Magnetics MRI system developments progressing broadly to plan
-- Siemens shipments remained steady in the UK and China
-- Composite Products had another solid year
Commenting on the results, Roger McDowell, Chairman, said:
"It has been a record year for the Group, in terms of orders,
revenue and profit, reinforced by the deft execution of our now
well-proven Pinpoint-Invest-Exit strategy (PIE). The former Hayward
Tyler Group (HTG) businesses performed very well in their first
full year with the Group and the Ormandy turnaround produced a
solid, if modest profit in its first full year since acquisition in
February 2018. The recent, tactical acquisitions of Tecmag, Texas;
Booth, Bolton, UK; and Energy Steel, Michigan are all integrating
well thus far. The Energy divisions and their management teams have
proven themselves to be commercially astute and we continue to
focus on profitable growth, to build valuable, enduring businesses.
Our budding medical division continues to make slow, but steady
progress, as it seeks to develop new technologies, to break through
into new sectors.
We continue to concentrate on aftermarket opportunities,
servicing end-user customers with comprehensive solutions,
resulting in good growth and strong prospects. The nuclear life
extension and decommissioning arenas are fertile ground for us, as
demonstrated by contract wins in the period worldwide. Other market
areas are also proving fruitful - such as renewable energy - and a
more stable oil and gas environment has seen us win important
contracts in that sector. Brexit and tariff wars are unwelcome
distractions for the Group, but they will not cause us to deviate
from our well-planned course. Despite the chill in the
macroeconomic air, we remain quietly confident about our prospects
in both Energy and Medical, with our strong Balance Sheet allowing
us to be both agile and resilient. Recent order wins and our
pipeline of opportunities underpin that outlook."
Enquiries:
Avingtrans plc 01354 692391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
N+1 Singer (Nominated Adviser) 02074 963000
Shaun Dobson/Lauren Kettle (Corporate Finance)
Mia Gardner/Rachel Hayes (Corporate Broking)
Newgate (Financial PR) 02076 539850
Adam Lloyd/ Tom Carnegie
About Avingtrans plc:
Avingtrans designs, manufactures and supplies original
equipment, systems and associated aftermarket services to the
energy, medical and industrial markets worldwide.
Business units
Hayward Tyler - Luton & East Kilbride, UK and USA, China and India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Energy Steel, Inc - Lapeer, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising
in: OEM parts obsolescence; custom component fabrication; engineering
design solutions; product refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK and Chengdu, China
Provider of safety-critical equipment for the energy, medical, science
and research communities, worldwide, specialising in precision pressure
and vacuum vessels and associated fabrications, sub-assemblies and
systems.
Booth Industries - Bolton, UK
Designs, manufactures, installs and services specialist 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.
Peter Brotherhood - Peterborough, UK
Specialises in the design, manufacture and servicing of performance-critical
steam turbines, turbo gen-sets, compressors, gear boxes and combined
heat and power systems.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving customers
in industrial markets.
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and associated
cryogenic systems for a variety of markets including MRI and provides
service and support for Nuclear Magnetic Resonance instruments.
Tecmag Inc - Houston, USA
Designs, manufactures, tests and installs instrumentation, including
full consoles, system upgrades, and solid-state probes, mainly for
Magnetic Resonance Imaging (MRI) and Nuclear Magnetic Resonance (NMR)
systems.
Crown International Ltd - Portishead, UK
Designs and manufactures market-leading pole and support systems for
roadside signage and safety cameras, rail track signalling and gantries.
Chairman's Statement
As the long-standing Chairman of Avingtrans, it is pleasing to
be able to report on another record year of results for the Group.
Orders, revenue, and profit all reached new highs and we are
confident about the embedded value of the Pinpoint-Invest-Exit
strategy (PIE), as the Group continues to hit target milestones
along the path towards eventual value realisation. The former
Hayward Tyler Group (HTG) businesses continued to improve, with
further growth and cost savings achieved in HTG's first full year
contribution. The combined businesses continue to demonstrate the
anticipated synergies. Ormandy has also integrated well, in its
first full turnaround year within the Group. It was a year in which
we drove shareholder value through Investment, but we also
Pinpointed Tecmag Inc in Houston, acquiring it to complement our
technology capabilities in MRI and NMR in the Medical division.
Post-period end, we acquired the assets of Booth Industries in
Bolton, UK and Energy Steel in Michigan, USA. Each of these
turnaround opportunities were acquired following agile due
diligence processes. They both augment our capabilities in the
nuclear aftermarket and decommissioning sector and Booth brings
Avingtrans into the wider Critical National Infrastructure (CNI)
market. The acquisition of Energy Steel will broaden Hayward
Tyler's product offering - particularly in precision manufacturing
and solutions for "orphan" OEM components for the nuclear
aftermarket - and provide cross-selling opportunities. Acquiring
Booth Industries enables the Process Solutions and Rotating
Equipment ("PSRE") division to expand its product and service
offering and deepen its relationships with its existing
customers.
The Energy divisional structures and management teams have shown
themselves to be highly effective in the period, continuing to
build upon two solid platforms displaying good global reach,
product and service diversity. Their unwavering focus is now on
growing into formidable and valuable businesses. The Group
continues to carefully build its fledgling medical and industrial
imaging division, which promises to produce a unique market
offering in the longer-term. This division was reinforced in the
period with the Tecmag acquisition, to give us the necessary
electronics and software capability for full system production.
Aftermarket growth is a common strategic theme across all three
divisions, to develop robust value propositions, in order to
support OEM and end-user customers, who are either operating Group
products or systems, or who have operational problems that the
Group can solve. This improved end-user model not only provides a
more predictable and repeatable pipeline, which in turn drives
improved profitability, but also boosts product and service
development and innovation. We are particularly keen to maximise
the revenue opportunities arising from the aftermarket access
afforded by recent acquisitions (eg Energy Steel) and partnerships
(eg with ABC Compressors, Spain).
The Engineered Pumps and Motors (EPM) division bolstered its
capability in India with a new motor rewind centre and officially
opened a new 3,250 square metre facility in Kunshan, China. These
enhanced units are securing end-user business in the region,
including in the valuable aftermarket. Our facilities also act as
operational hubs for the sale of original equipment, cost effective
sourcing, engineering and tendering. Energy Steel, which
manufactures components for the civil nuclear power industry,
provides further access to the Nuclear aftermarket and is
integrating into EPM well.
The PSRE division is continuing to refine its offering to the UK
nuclear market - especially to Sellafield for nuclear
decommissioning - whilst also using this capability to position for
longer term new nuclear technologies. Ormandy had a profitable
first full turnaround year with the group and the integration of
Booth has been satisfactory to date.
The Medical and Industrial Imaging (MII) division continues to
develop steadily, with both the UK and Chinese businesses
consolidating their positions in the supply chain. Scientific
Magnetics and Tecmag are working with their partners to produce new
product offerings for the NMR and MRI markets. While these
developments are still at a relatively early stage, the Board is
excited about the long-term potential of the division which, given
time to bring these developments to fruition, is expected to yield
positive returns for the Group.
For the eighth successive year, the Board has declared an
increased final dividend of 2.4 pence per share, producing a full
year total of 3.8 pence per share, underlining our commitment to
long term shareholder returns and our positive view about the
prospects for the Group, underpinned by our prudent approach to
debt and financial headroom.
Finally, since the last annual report, Ewan Lloyd-Baker resigned
from the Board, having assisted Avingtrans with the transition of
HTG and Colin Elcoate resigned from his position as CCO. The Board
and I wish Ewan and Colin all the best with their future endeavours
and thank them for their hard work whilst they were with us. I
warmly welcome all of the staff in recent acquisitions to
Avingtrans. Their commitment to reinvigorate their businesses will
enrich the Group. On behalf of the shareholders, I thank all
Avingtrans employees for their hard work and commitment to the
Group during the past 12 months, as we look forward with enthusiasm
to FY2020.
Roger McDowell
Chairman
17 September 2019
Strategy and business review
Group Performance
Group Strategy
Our core strategy is to buy and build engineering companies in
niche markets, particularly where we see turnaround and
consolidation prospects; a strategy we call Pinpoint-Invest-Exit
("PIE"). We have had a strong track record in returning significant
shareholder value over the past decade and FY2019 was another
successful year, cementing our turnaround of Ormandy and concluding
the acquisition of Tecmag for the medical division. Post year end,
there have been two further acquisitions, both being turnaround
opportunities.
With an increased presence in our target markets, a focus on the
aftermarket, strength in depth of the management teams and a lean
central structure, the Group continues to grow profitably and the
Board has renewed its focus on seeking additions to the Avingtrans
value-add proposition. Conversely, we are also pragmatic when it
comes to disposing of assets which become non-core, such as the
exit of Whiteley Read in the period.
All of the Group's key financial metrics have trended
positively, including the percentage of aftermarket penetration,
despite a period of restructuring following the successful
integration of HTG.
The business is focused on the global Energy and Medical
markets, both of which play into some of the world's mega-trends,
such as: continued urbanisation; an ageing population; and an
accelerating transition towards a cleaner and healthier planet.
Divisional Strategies
Engineered Pumps and Motors (EPM, Energy): EPM continues to
develop its nuclear installed base (civil and defence) - notably
for life extension applications - and its offering to the fossil
fuels market sectors. Post year end, this strategy was bolstered by
the acquisition of Energy Steel in North America, which specialises
in nuclear life extension. In addition, the EPM business continues
to develop solutions for new nuclear technologies and other low
carbon energy sources, such as concentrated solar, to capitalise on
the global energy supply transition. In FY19 EPM secured a number
of key contracts, including to provide high temperature molten
salt, nuclear life extension equipment and spare parts to nuclear
reactors. As part of the division's global business strategy and to
support continued growth, Avingtrans opened a new state of the art
factory in Kunshan, China in January 2019.
Process Solutions and Rotating Equipment (PSRE, Energy): The
primary strategy is to develop a comprehensive offering to the
nuclear decommissioning and reprocessing markets, building on the
long-term contracts to build nuclear waste storage containers and
the installed base of equipment across the vast Sellafield site. In
parallel, to continue to support the nuclear submarine fleet and
facilities for the UK MOD and targeted opportunities in the equally
highly regulated offshore Oil & Gas markets. Post year end, the
division's nuclear credentials were boosted by the acquisition of
the assets of Booth Industries, which also broadened our market
reach into Critical National Infrastructure (CNI).
Medical and Industrial Imaging (MII, Medical): The focus for the
medical division is to become a niche market leader in the
production of high integrity components and systems for medical and
scientific equipment manufacturers including MRI, proton therapy
and Nuclear Magnetic Resonance (NMR). In October 2018, we acquired
Tecmag Inc in Texas, to strengthen our NMR/MRI capabilities. This
business is able to design and manufacture the electronics and
software systems required for these markets.
The common theme we are looking to exploit across energy and
medical is the continued pressure on aftermarket expenditure, where
operational efficiency, reliability and safety are paramount and
operators are looking to their supply chain partners to provide
long term support of aging infrastructure and legacy
installations.
Pinpoint-Invest-Exit
Continuing its Pinpoint-Invest-Exit strategy, Avingtrans added a
number of bolt-on acquisitions in the year, including Tecmag, Inc.
in October 2018; adding expertise in Magnetic Resonance Imaging and
Nuclear Magnetic Resonance systems to the Group's developing
Medical division. Based in Texas, Tecmag designs, manufactures,
tests and installs instrumentation such as consoles, spectrometers
and solid-state probes for primarily Magnetic Resonance Imaging
(MRI) and Nuclear Magnetic Resonance (NMR) systems. It has strong
technology and a material installed base from over 35 years of
supplying custom products to these markets. Tecmag will be
integrated into Scientific Magnetics, which has expertise in
superconducting magnets and cryogenics and is focused on the same
end markets. This will provide a platform for further product
development and investment as management advances its buy, build
and sell strategy in Medical & Industrial Imaging.
In June 2019, the Company announced the acquisition of
Bolton-based Booth Industries Limited, a leading UK engineering
company, for a consideration of GBP1.8m, from the administrators of
AIM-quoted Redhall Group plc ("Redhall"), with significant
read-across to the Group's Metalcraft operations.
Pinpoint-Invest-Exit (continued)
The Group also acquired the brand name and selected assets of
Jordan Manufacturing, a provider of specialist manufacturing and
fabrication services and another division of Redhall, in August
2019, which strengthens Metalcraft's position as a key player in
the nuclear supply chain.
Also in June 2019, the Company acquired US-based Energy Steel
& Supply Co. (Energy Steel), an established manufacturer of
machined products and components to the civil nuclear power
industry. US-based Energy Steel & Supply Co. (Energy Steel) is
an established manufacturer of machined products and components to
the civil nuclear power industry, acquired by Avingtrans for
consideration of $0.6m. Hayward Tyler has over 600 pumps in active
service in nuclear applications across the world and this
acquisition expands the Company's nuclear capabilities and product
lines for new and existing customers.
The integrations of Booth and Energy Steel are proceeding to
plan thus far.
M&A activity in energy capital goods markets remains strong
and businesses like ours continue to command high valuations.
Avingtrans remains confident about the current strategic direction
and potential future opportunities across its chosen markets.
Markets - Energy
The global demand for energy continues to rise, driven primarily
by population increase, continued urbanisation and improved
prosperity. Although in the longer term, the latest estimates show
that overall demand may slow, due to increased efficiency and
decarbonisation, but for the time being the global energy compound
annual growth rate (CAGR) can be assumed to be of the order of
2%.
End User/Aftermarket
Operators and end-users are demanding a blend of quick response
through local support with an overarching requirement to drive
improvements through equipment upgrades and modernisation. In the
West, where facilities are being operated for longer than their
intended design lives - and often in a drive for increased capacity
alongside tougher regulations - there is a strong demand for true
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. With increased
relevance and global reach, balanced alongside heritage and
renowned expertise, they can find niche positions and value
propositions alongside the global players and the local
independents.
Nuclear
Nuclear energy as a low carbon, baseload power source remains an
uncertain market with respect to future growth. Almost all of the
1GW+ new build opportunities are currently in Asia, with the
exception of the limited UK programme. However, we are still
enjoying buoyant market segments, including supporting the
operational fleet, continued safe operation and life extensions,
decommissioning and reprocessing. We are also working on the
long-term development of the next generation of technologies - i.e.
Small Modular (SMR), or Advanced Generation IV Reactors. In
addition, these segments all have the attractive backdrop of a
consolidating supply chain and paucity of expert knowledge, all of
which play directly to the expanding Avingtrans capability.
The USA still operates the biggest civil nuclear fleet in the
world, with 99 reactors generating more than 30 per cent. of the
world's nuclear electricity. When coupled with the heritage
Westinghouse technology operating in Europe and Asia, the EPM
division's long-standing position in this market provides fertile
ground for further growth. Obsolescence is a key issue for nuclear
operators worldwide and the Avingtrans Energy Divisions are well
positioned to support operators in addressing this key operational
issue; the recent acquisition of Energy Steel in the USA bolstering
the Group's capabilities in this regard.
The UK remains pre-eminent when it comes to decommissioning and
reprocessing, in terms of innovative technology and overall spend.
The Group is embedded in the future manufacture of waste containers
for Sellafield and will continue to expand its presence in the UK
and globally in the longer term. The development of new nuclear
technologies is ongoing, with pockets of activity in the UK, Russia
and South Korea and the USA and China dominating development
activity. The Group views these new technologies as an attractive
route forwards 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, as
discussed in the previous section, the main sub-sectors are as
follows:
-- Coal - the Group continues to see good aftermarket from coal
fired power stations even though the demand for new power stations
is in decline. Opportunities still exist in India, China, South
East Asia, Eastern Europe and the Middle East. EPM is optimising
its product line, to take market share and to create tomorrow's
aftermarket.
Power Generation (continued)
-- Gas - natural gas, primarily in the form of combined cycle
gas turbine power plants is a growing market space, primarily in
the West. Although not yet dominated by Asian EPCs and equipment
suppliers, the Group is moving into this market with both existing
and new product lines.
-- Renewables - renewable technologies and their supporting
infrastructure are a growing market globally. The Group has a broad
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 for
concentrated solar applications.
Oil & Gas
After several years of oversupply, the industry has become
relatively more stable and the price of Brent crude now trades at
over $60 a barrel. The industry is slowly recovering from the
recent years of weak prices, low capital expenditure, portfolio
realignments and productivity efficiencies, and the effect is
starting to be seen across the Oil & Gas sector.
-- Upstream - operating expenditure is now being released to
secure current operations, resulting in additional capex spend for
new projects. The Group is seeing increased bidding activity and is
optimistic regarding future projects. The ongoing investments in
disruptive technologies - such as the subsea recovery-boosting
technology from F-Subsea, where EPM is an exclusive partner - are
now poised to move through the development phase to full
deployment.
-- Midstream - the longer-term midstream trend of interest to
the Group is the evolving liquefied natural gas (LNG) market, for
which there is a growing demand and a continual import export
transition developing. While market predictions for FLNG and FRSU
vessels are bullish, real activity in the supply chain remains
relatively sluggish.
-- Downstream - slower growth in the demand for liquid, combined
with continued growth of LNG and biofuels continues to put pressure
on global refining. New refinery projects which are already planned
or under construction for the next five years are judged to be
sufficient to meet new capacity. However, the Group's equipment is
installed in critical systems on existing plants where continued
operation is key, so aftermarket opportunities are strong.
Digitalisation & Condition Monitoring
Companies across the energy market continue to invest in digital
technologies to improve productivity, efficiency and predictability
in the field. At the equipment level this translates to a series of
devices, sensors and algorithms which can predict breakdowns before
they occur and ensuring equipment is running at its optimum
performance. The Group successfully launched its first monitoring
product, DataHawkTM, for Boiler Circulating Pumps last year and
will build on this success by adding this capability to both a
wider set of original equipment and its aftermarket service
offering. Peter Brotherhood now adds condition monitoring to its
steam turbines as a standard part of the overall package.
Markets - Medical
The Diagnostic (medical) and molecular imaging markets are large
global sectors, dominated by a few large systems manufacturers. The
total Diagnostic Imaging Market will be worth $34bn by 2024,
according to Bloomberg and is expected to continue to grow at c5%
per annum over the next 10 years. The largest market is the USA
(25%), followed by Europe (19%) and Japan (17%). The fastest
growing markets are China and India, which currently comprise 12%
and 3% of the global market respectively.
The Avingtrans Medical division is primarily targeting the
Magnetic Resonance Imaging (MRI) and Nuclear Magnetic Resonance
(NMR) segments of these markets, due to the common thread
requirements for superconducting magnets and cryogenics. These two
segments account for approximately 85% of our business in the
medical division. Market drivers for these segments include an
ageing global population and the global pharmaceutical industry's
research needs. MRI is approximately 16% by value of the total
diagnostic Imaging market and is projected to grow at 5% p.a. NMR
is a smaller market, currently estimated at $800m p.a. by industry
sources and is also growing at c5% p.a., with Bruker enjoying a
current market share of over 80%.
End User/Aftermarket
The MRI market segment is dominated by a handful of
manufacturers, including GE, Siemens and Philips, who account for
circa 80% of revenue globally. These players also dominate the
aftermarket, though there are a few independent MRI service
businesses in existence. Avingtrans is not present in the MRI
aftermarket at this time.
The NMR market is similar, currently dominated by Bruker (CH/DE)
and Jeol (JA). Avingtrans is aligned with MR Resources Inc, a
well-established US business, which services the NMR aftermarket.
The Avingtrans Medical division is well positioned in this end-user
market space and has begun to win service contracts with European
NMR users, following our partnership agreement with MR
Resources.
Markets - Medical (continued)
MRI
As noted above, the MRI market segment is dominated by a handful
of global manufacturers. For component and sub-system supply,
Avingtrans is most aligned to the market leader, Siemens and also
to Canon, which acquired the Toshiba MRI business in recent years.
As far as full system supply is concerned, we are currently
investigating a number of niche MRI applications (e.g. veterinary
imaging) and their associated routes to market, with the intention
of pinpointing the most promising of these for future
investment.
NMR
We are aligned with new market entrant Q One Instruments of
Wuhan, China and also with MR Resources of the USA, as noted above.
Together, we form an alliance to challenge the dominance of the
existing players and to provide customers with an additional source
for NMR products, service and support. Former NMR customers of
Agilent (formerly Varian) are also being given much needed support.
Whilst it is still early days for this initiative, we are
successfully winning support contracts for end users and the
prospect list for Q One Instruments is promising. Having acquired
Tecmag Inc in Houston in October 2018, to add software and
electronics capabilities to our NMR/MRI systems, we also acquired
some assets from Acorn NMR in California, to transfer to Tecmag and
to broaden our NMR service offering into end-user sample analysis
and characterisation.
Operations
Operational Key Performance Indicators (KPI's)
2019 2018
-- Percentage of total revenue deriving from aftermarket sales
(%) 43.3 42.1
-- Customer quality - defect free deliveries (%) 98.0 97.3
-- Customer on-time in-full deliveries (%) 87.2 84.2
-- Annualised staff turnover including restructuring (%) 13.0
17.3
-- Health, Safety and Environment incidents per head per annum
0.10 0.14
We have added a new KPI this year, being aftermarket (AM) sales
as a percentage of total revenue. This nudged up positively, as our
initiatives at HT began to take effect. Note that recent
acquisitions like Tecmag and Ormandy have very little AM sales at
present, which dampens the overall figure in the mix. Other KPIs
also trended positively, with customer quality and deliveries
moving in the right direction and staff turnover reducing, as the
disruptive effects of the HTG acquisition subsided, albeit that
newer acquisitions tend to produce an initial bow wave of staff
turnover, until we stabilise these businesses. It is pleasing to
note the on-going positive trend in HSE related incidents, since we
place a high priority on improving these processes at newly
acquired businesses.
EPM Division - Energy
The EPM division, which represents the bulk of the former
Hayward Tyler companies (excluding East Kilbride) has an enviable
installed base across the globe and strong brand recognition.
Coupled with its strong domain knowledge across the energy market
and its core competencies in wet wound electrical motors, canned
motor pumps and nuclear codes and standards, the division continues
to expand its end-user offering.
The division finds itself in a relatively strong position, being
more agile than some of its bigger competitors, having a respected
OEM brand unlike the local independents and able to offer a strong
solution-based offering for its own installed base, as well as
other Original Equipment Manufacturers.
With a fully developed presence in Europe and North America, the
division completed the opening of its new China facility in January
2019 and the new motor rewind centre in India. The integration of
these regional centres alongside other regional partners in key
territories will give the division expanded global reach,
capability and the platform to expand its end-user business. This
activity was underpinned by winning a GBP10m order with Vattenfall
in Sweden in February 2019, as well as further orders from KHNP in
S Korea and US nuclear operators.
In the UK and China, EPM signed an Authorised Channel and
Service Partner agreement with Baker Hughes, a GE company (BHGE),
which has a significant installed base in the UK, but no effective
local facility to service, overhaul and upgrade their
equipment.
In addition to the drive for improved end-user business, EPM is
addressing the shift towards a low carbon energy future. Its
experience and product knowledge allowed it to gain its first order
from a Gen IV nuclear developer in the USA for molten salt
technology and also funding from the US Department of Energy to
develop molten salt pump technology for advanced concentrated solar
applications. With its new range of pumps and its optimised
seal-less circulating pumps for natural gas and a range of
renewable technologies, EPM is slowly but surely reducing its
reliance on coal fired power stations.
Operations (continued)
Post year end, EPM acquired Energy Steel (ES) - a specialist in
nuclear aftermarket products - from Graham Corporation. This
acquisition allows us to cross-sell between HT and ES into the
North American nuclear fleet and bolsters our credentials in that
market segment.
PSRE Division - Energy
The acquisition of the trade and assets of Ormandy Ltd last year
has integrated well and has made a satisfactory, albeit modest,
profit in its first full year with the Group. Ormandy manufactures
off-site plant, heat exchangers and other HVAC (heating,
ventilation and air conditioning) products. Its success has meant
that Whiteley Read (WRE) became non-core and this site was sold
during the year to Glacier Energy, recovering the Group's
investment. Post year end, we also closed the small Maloney site,
with the remaining assets and trade from there being transferred to
Ormandy and Fluid Handling, along with a few of the employees at
Maloney.
The Fluid Handling business in East Kilbride, Scotland had an
excellent year, as it expanded its capability to support the
nuclear decommissioning and reprocessing market in the UK. This has
further strengthened the division's strategic relationship with
Sellafield Limited and the Nuclear Decommissioning Authority.
The Energy divisions' footprint was expanded, post year-end,
when the Group acquired the assets of Booth Industries, a leading
manufacturer of high integrity doors, used in the nuclear, oil and
gas and critical national infrastructure markets. The integration
of Booth is progressing to plan.
The Group also has a keen interest in both the UK nuclear
submarine fleet and associated facilities, as well as developing
new nuclear technologies like SMRs (Small Modular Reactors). The
division has a good installed base on the UK submarine fleet, is
the chosen manufacturing partner for the Astute steam turbines and
through this experience has the right capability, nuclear culture
and experience to support longer term nuclear technologies.
Aside from nuclear, the divisional brands also have a strong
presence in the Oil and Gas market - eg through Peter Brotherhood
(PB). This market is now improving, with PB securing an order for
cGBP10m in the period for steam turbines for a floating production
vessel.
Aligned with the overall Group strategy to focus on end-user
business, the division has seen an increase in end-user sales. In
particular, PB saw further increases in aftermarket sales and won a
new GBP5m UK government end-user contract in June 2018. End-user
service arrangements have been signed to gain better access to the
reciprocating compressor installed base and an expansion of the
channel partners and agents has been concluded. Overall, the ratio
of aftermarket sales for the division has not improved in the year,
but this is due to success in growing OE sales in parallel with the
aftermarket.
Finally, the Crown business remains a small but positive
performer in the division, although the year was quieter than
anticipated, due to delays in the roll-out of smart motorways and
also that of 5G telecoms networks.
MII - Medical Division
We are making gradual progress at Scientific Magnetics and at
Tecmag, as we seek to integrate our various sub-systems to produce
a prototype MRI demonstrator unit. We have now been able to take
first images of inanimate objects in the system, which show that
everything is working at a basic level. We are now into the next
phase of image refinement, to bring the system up to the level
expected in clinical diagnostic imaging. This next phase will take
us a few months to complete and will continue to absorb some cash
in the intervening period.
Meanwhile, concerning NMR, our service offering has been
strengthened, both in the UK and the USA, so we are optimistic
about seeing good progress over the next 12 months. We continue to
work with QOne in China and Switzerland on new NMR systems, to
challenge the market leader. QOne have been successful in selling
initial systems to the market over the last year, albeit that the
numbers are still small for this start-up business.
Following its acquisition in October 2018, Tecmag has performed
relatively well initially and, with support from other Group
resources, managed to achieve a break-even result in its first
period with Avingtrans. We were pleased to find that there is a
decent pipeline of legacy business to go for, pending our
development of new products to provide additional new business
opportunities. There is no doubt that Tecmag's IP will become
indispensable in our pursuit of the targeted niche MRI and NMR
markets.
Metalcraft UK's business with Siemens for MRI components
continues to be stable, although progress in China with other
vacuum vessel customers - e.g. Alltech - remains rather pedestrian.
Composite Products (CP) had a reasonable year, with deliveries to
Rapiscan continuing and support from other smaller accounts at this
unit.
Financial Performance
Adoption of IFRS 15 and IFRS 9
The Group has adopted IFRS 15 Revenue from Contracts with
Customers and IFRS 9 Financial Instruments from 1 June 2018.
Adoption of IFRS 15 has led to a number of changes in the way the
Group recognises revenue including whether to recognise over time
or at a point in time, the splitting of contracts into multiple
performance conditions which are recognised separately, the
aggregation of a series of products into a single performance
condition, reassessment of contract losses in the prior period and
a change in the methodology for the recognition of long term
service agreements.
The Group has applied IFRS 15 and IFRS 9 using the cumulative
effect of initially applying these new standards with an adjustment
of GBP1.1m to the opening retained earnings at 1 June 2018. The
comparative information has not been restated and continues to be
reported under IAS11 and IAS 18.
Key Performance Indicators
The Group uses a number of financial key performance indicators
to monitor the business, as set out below.
Revenue: 34% increase with underlying growth 11%
Overall Group revenue increased to GBP105.5m (2018: GBP78.9m),
primarily driven by the effect of a full year results for the HTG
acquisition. Underlying revenue growth, excluding acquisitions was
11.2%.
Profit margin: significant improvement in results, driven by
FY18 acquisition of HTG
Adjusted EBITDA (note 4) increased by 65% to GBP9.4m (2018:
GBP5.7m) with good further progression from the acquisitions made
in FY18. Operating profit was GBP3.6m (2018: loss GBP3.8m) mainly
due to the strong progression in profit and the non-recurrence of
significant HTG exceptional costs which were incurred in FY18 and a
reduction of the non underlying costs to GBP1.6m for the
amortisation of intangibles from business combinations (2018:
GBP3.3m).
Gross margin: solid progress continues
Group gross margin improved to 26.7% (2018: 25.5%) due to the
higher HTG gross margins and an increase in the proportion of
revenue derived from aftermarket services when compared to prior
year.
Tax: future profits and cash protected by available losses
The effective rate of taxation at Group level was a 20% tax
charge primarily due to the US tax charge offset by a deferred tax
credit arising from the amortisation of business intangibles. The
tax position will be aided in the coming years with the now reduced
US rate being supported by utilisation losses in the UK and China.
We continue to be cautious, not recognising all of the trading tax
losses in the UK.
Adjusted Earnings per Share (EPS): a 77% improvement
Adjusted diluted earnings per share and diluted earnings per
share for continuing operations improved to 14.9p (2018: 8.4p) and
8.0p (2018: loss 16.0p) respectively as higher margin aftermarket
and cost savings work through.
Funding and Liquidity: net debt post acquisition remains low
Net debt at 31 May 2019 was GBP2.0m (31 May 2018: net debt:
GBP7.1m). Underlying strong profits enhanced by a GBP1.6m positive
working capital movement, skewed by advance payments on accounts
for contracts drove a cash inflow from operating activities of
GBP9m (2018 outflow GBP6.9m), which will partly reverse in FY20.
The Directors consider that the Group has sufficient financial
resources (note 22) to deliver its short term strategic objectives
and is maintaining a strong relationship with its banking
partners.
Dividend: steadily improving
The Board again proposes to underpin our progressive dividend
policy. We are pleased to be able to recommend an improved final
dividend of 2.4 pence per share (2018: 2.3 pence per share). We
intend to continue on this progressive path, subject to the outcome
of acquisition activities in the coming years. The dividend will be
paid on 6 December 2019, to shareholders on the register at 25
October 2019.
People
At Board level, the only change in the period was that Ewan
Lloyd Baker left the Group in November 2018. Ewan became a
Non-Executive Director following the acquisition of the Hayward
Tyler Group by Avingtrans in September 2017. Having overseen the
successful handover, Ewan wished to move on and pursue other
interests. Graham Thornton has expressed his intention to retire
from the Board after the AGM this year. Within the Group structure,
post-period end, Colin Elcoate resigned from his position as the
Chief Commercial Officer for Avingtrans, to take up a CEO role
elsewhere. The Board wish Ewan and Colin all the best in their
future chosen careers. Top level divisional management teams were
largely unchanged, with the exception of the promotion of Alvin Sim
to General Manager of Hayward Tyler China, following the departure
of Colin Elcoate.
In a broader sense, the management teams in each of the three
divisions continue to be strengthened, with a number of key
appointments being made in the year, and with emphasis on the
importance of the aftermarket opportunities. Skills availability is
always challenging, but we do not expect to be unduly constrained
by shortages. Avingtrans continues to invest significant effort in
developing skills in-house, both through structured apprenticeship
programmes and graduate development plans. The Group continues to
be recognised nationally for the strength of its apprenticeship and
graduate training schemes. For example, Metalcraft won the top
accolade for 'SME Investment in Skills' at the SEMTA (Scientific,
Engineering, Manufacturing & Technology Alliance) 2018 Awards
and is consistently rated in the Top 100 apprenticeship schemes in
the UK.
Our global workforce is becoming more integrated and this
provides additional capability, capacity and innovative thinking
around the clock, to support to our global blue-chip customer
base.
Health, Safety and Environment (HSE)
The Group takes HSE matters and its related responsibilities
very seriously.
As regular acquirers of businesses, we find different levels of
capability and knowledge in different businesses. Often, a key
investment need in smaller acquisitions is to spread HSE best
practice from other Group businesses and bring local processes up
to required standards. Larger acquisitions like HTG have well
developed HSE practices and we seek to learn from these in other
business units.
Health and Safety incident reporting has improved across the
Group and incident trends have generally been improving over recent
years. Near miss reporting and knowledge exchange is also
positively encouraged, to facilitate learning and improvement. At
Board level, Les Thomas has HSE oversight and he conducts
inspections with local management as appropriate.
The Group's environmental policy is to ensure that we understand
and effectively manage the actual and potential environmental
impact of our activities. Our operations are conducted such that we
comply with all legal requirements relating to the environment in
all areas where we carry out our business.
During the period covered by this report, the Group has not
incurred any significant fines or penalties, nor been investigated
for any significant breach of HSE regulations.
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 sex, nationality, ethnicity, language, age, status, sexual
orientation, religion or disability.
We believe that employees should be able to work safely in a
healthy workplace, without fear of any form of discrimination,
bullying or harassment. We have begun to roll-out "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
largely beyond our control.
Ethical policy
The Group complies with the Bribery Act 2010. We do not tolerate
bribery, corruption or other unethical behaviour on the part of any
of our businesses or business partners in any part of the world.
Employee training has been completed in all areas of the business
to ensure that the Act is complied with.
Outlook
Avingtrans is a niche engineering market leader in the Energy
and Medical sectors, with a successful profitable growth record,
underpinned by our 'PIE' strategy. Recent acquisitions will provide
further opportunities for the Group to build enduring value for
investors in resilient engineering market niches. We will continue
to be frugal and seek to crystallise value and return capital when
the timing is right, as part of the PIE strategy
implementation.
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. The HTG integration is now demonstrably complete and the
integrations of Ormandy, Tecmag, Booth and Energy Steel are all
proceeding to plan, as demonstrated by the results in the period.
Our value creation targets continue to be accomplished as
planned.
The energy divisions have a strong emphasis on the thermal
power, nuclear and offshore oil & gas markets, all of which are
showing positive signs of regeneration. The medical division
continues to focus on high integrity components and systems for
leading medical, industrial and scientific equipment
manufacturers.
To drive profitability and market engagement, each division has
a clear strategy to support end-user aftermarket operations,
servicing their own equipment and that of pertinent third parties,
to capitalise on the continued market demand for efficient,
reliable and safe facilities.
We remain vigilant concerning Brexit, but we are not overly
concerned, since our direct EU exposure is somewhat limited and we
have taken appropriate evasive actions in our supply chains, with
likely further such actions to follow, depending on the exact
nature of the eventual Brexit outcome. Similarly, US and Chinese
government tariff change risks have been largely mitigated by an
agile supply chain response and we will continue to monitor this
situation closely.
As our markets continue to develop, M&A activity is still
strong and businesses like ours can command high valuations at the
point of exit, as exemplified by the Sigma sale previously. The
Board is 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 build businesses which
can create superior shareholder value, whilst maintaining a prudent
level of financial headroom, to enable us to endure any
macroeconomic headwinds.
The Strategic Report was approved by the Board on 17 September
2019 and signed on its behalf by:
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
17 September 2019 17 September 2019 17 September 2019
Consolidated Income Statement
for the year ended 31 May 2019 Note 2019 2018
GBP'000 GBP'000
Revenue 1 105,516 78,864
Cost of sales (77,314) (58,787)
--------- ---------
Gross profit 28,202 20,077
Distribution costs (4,722) (4,050)
Other administrative expenses (19,852) (19,869)
--------- ---------
Operating profit before amortisation of acquired intangibles, other non-underlying items
and
exceptional items 5,805 2,796
Amortisation of acquired intangibles 2 (1,595) (3,303)
Other non-underlying items 2 (98) (69)
Exceptional items 2 (484) (3,266)
--------- ---------
Operating profit/ (loss) 1 3,628 (3,842)
Finance income 132 36
Finance costs (616) (692)
--------- ---------
Profit/ (loss) before taxation 3,144 (4,498)
Taxation 3 (633) 12
Profit/ (loss) for the financial year attributable to equity shareholders 2,511 (4,486)
========= =========
Earnings/(loss) per share:
From continuing operations
- Basic 4 8.0p (16.0)p
- Diluted 4 8.0p (16.0)p
========= =========
Consolidated statement of Comprehensive income
2019 2018
GBP'000 GBP'000
Profit/(loss) for the year 2,511 (4,486)
Items that will not be subsequently be reclassified to profit or loss
Remeasurement of net defined benefit liability (581) 71
Income tax relating to items not reclassified 99 (14)
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations 445 (137)
Total comprehensive income for the year attributable to equity shareholders (2,474) (4,566)
======== ========
Consolidated statement of changes in equity
at 31 May 2019
Capital
Share redemp- Trans-
premium tion Merger lation Other Invest-ment Retained
Share capital account reserve reserve reserve reserves in own shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2017 958 12,771 1,299 - 2 180 (2,250) 31,946 44,906
Ordinary shares
issued 595 614 - 28,949 - - - - 30,158
Dividends paid - - - - - - - (906) (906)
Investment in
own shares - - - - - - (585) - (585)
Share-based
payments - - - - - - - 69 69
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Transactions
with owners 595 614 - 28,949 - - (585) (837) 28,736
Loss for the
year - - - - - - - (4,486) (4,486)
Other
comprehensive
income
Actuarial gain
for the year
on pension
scheme - - - - - - - 71 71
Deferred tax on
actuarial
movement on
pension scheme - - - - - - - (14) (14)
Exchange gain - - - - (137) - - - (137)
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Total
comprehensive
income for the
year - - - - (137) - - (4,429) (4,566)
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Balance at 31
May 2018 1,553 13,385 1,299 28,949 (135) 180 (2,835) 26,680 69,076
============= ======== ======== ======== ======== ========= ============== ========== =======
At 1 June 2018 1,553 13,385 1,299 28,949 (135) 180 (2,835 26,680 69,076
Adjustment of
transitioning
to IFRS 15 and
9 - - - - - - - (1,284) (1,284)
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Adjusted equity
as at 1 June
2018 1,553 13,385 1,299 28,949 (135) 180 (2,835 25,396 67,792
Ordinary shares
issued 15 633 - - - - - - 648
Dividends paid - - - - - - - (1,118) (1,118)
Investment in
own shares - - - - - - (600) - (600)
Share-based
payments - - - - - - - 98 98
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Transactions
with owners 15 633 - - - - (600) (1,020) (972)
Profit for the
year - - - - - - - (2,511) (2,511)
Other
comprehensive
income
Actuarial loss
for the year
on pension
scheme - - - - - - - (581) (581)
Deferred tax on
actuarial
movement on
pension scheme - - - - - - - 99 99
Exchange gain - - - - 445 - - - 445
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Total
comprehensive
income for the
year - - - - 445 - - 2,029 2,474
------------- -------- -------- -------- -------- --------- -------------- ---------- -------
Balance at 31
May 2019 1,568 14,018 1,299 28,949 310 180 (3,435) 26,405 69,294
============= ======== ======== ======== ======== ========= ============== ========== =======
Consolidated Balance Sheet
at 31 May 2019 2018 2018
GBP'000 GBP'000
Non current assets
Goodwill 23,369 23,369
Other intangible assets 14,483 15,612
Property, plant and equipment 26,576 27,595
Deferred tax 1,423 1,454
Pension and other employee obligations 1,299 1,590
---------- ----------
67,150 69,620
Current assets
Inventories 14,441 10,341
Trade and other receivables : amounts falling due within one year 31,549 34,606
Current tax asset 234 608
Cash and cash equivalents 8,909 6,574
---------- ----------
55,133 52,129
Total assets 122,283 121,749
========== ==========
Current liabilities
Trade and other payables (31,405) (26,179)
Obligations under finance leases (750) (1,179)
Borrowings (4,945) (6,719)
Current tax liabilities (69) (15)
Provisions (5,340) (6,135)
Derivatives (44) (127)
Total current liabilities (42,553) (40,354)
========== ==========
Non current liabilities
Borrowings (3,817) (4,435)
Obligations under finance leases (1,420) (1,375)
Deferred tax (2,073) (2,914)
Contingent consideration (256) (256)
Other creditors (2,870) (3,339)
---------- ----------
Total non-current liabilities (10,436) (12,319)
---------- ----------
Total liabilities (52,989) (52,673)
========== ==========
Net assets 69,294 69,076
========== ==========
Equity
Share capital 1,568 1,553
Share premium account 14,018 13,385
Capital redemption reserve 1,299 1,299
Translation reserve 310 (135)
Merger reserve 28,949 28,949
Other reserves 180 180
Investment in own shares (3,435) (2,835)
Retained earnings 26,405 26,680
Total equity attributable to equity holders of the parent 69,294 69,076
========== ==========
Consolidated Cash Flow Statement
for the year ended 31 May 2019 Note 2019 2018
GBP'000 GBP'000
Operating activities
Cash flows from operating activities 10,468 (6,142)
Finance costs paid (608) (363)
Income tax paid (589) (212)
Contributions to defined benefit plan (243) (175)
--------- ----------
Net cash inflow/(outflow) from operating activities 9,028 (6,892)
--------- ----------
Investing activities
Acquisition of subsidiary undertakings , net of cash acquired 5 (132) (11,896)
Finance income 131 13
Purchase of intangible assets (848) (712)
Purchase of property, plant and equipment (2,344) (2,654)
Proceeds from sale of property, plant and equipment 248 -
--------- ----------
Net cash used by investing activities (2,945) (15,249)
Financing activities
Equity dividends paid (1,118) (906)
Repayments of bank loans (3,278) (3,483)
Repayments of obligations under finance leases (1,033) (1,025)
Proceeds from issue of ordinary shares 48 47
Proceeds from borrowings 597 6,289
--------- ----------
Net cash (outflow)/ inflow from financing activities (4,784) 922
Net increase/(decrease) in cash and cash equivalents 1,299 (21,219)
Cash and cash equivalents at beginning of year 6,565 27,703
Effect of foreign exchange rate changes on cash 189 81
--------- ----------
Cash and cash equivalents at end of year 8,053 6,565
--------- ----------
Cash flows from operating activities:
for the year ended 31 May 2019
2018 2018
GBP'000 GBP'000
Continuing operations
Profit/(loss) before income tax from continuing operations 3,144 (4,498)
Adjustments for:
Depreciation 3,240 2,532
Amortisation of intangible assets 393 374
Amortisation of intangibles from business combinations 1,595 3,303
Gain on disposal of property, plant and equipment (13) -
Finance income (132) (36)
Finance expenses 616 692
Share based payment charge 98 69
Changes in working capital
(Increase)/decrease in inventories (2,213) 4,144
Decrease/(increase) in trade and other receivables 1,158 (8,618)
Increase/(decrease) in trade and other payables 4,150 (3,088)
Decrease in provisions (1,458) (1,039)
Other non cash changes (110) 23
Cashflows from operating activities 10,468 (6,142)
======= =======
Notes to the Preliminary Statement
31 May 2019
1 Segmental analysis
Energy Energy Medical Unallocated
Year ended 31 May 2019 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 13,888 31,527 12,048 - 57,463
After Market 35,069 12,884 100 - 48,053
--------------- ---------- ---------- --------------- ------------
Revenue 48,957 44,411 12,148 - 105,516
=============== ========== ========== =============== ============
Operating profit/(loss) 2,874 1,939 (204) (981) 3,628
Net finance costs (484)
Taxation (633)
------------
Profit after tax from continuing operations (2,511)
============
Segment non-current assets 44,285 17,903 4,962 - 67,150
Segment current assets 20,756 28,051 5,036 1,290 55,133
--------------- ---------- ---------- --------------- ------------
Segment liabilities (27,563) (21,040) (1,417) (2,969) (52,989)
--------------- ---------- ---------- --------------- ------------
Net assets 37,478 24,914 8,581 (1,679) 69,294
=============== ========== ========== =============== ============
Non-current asset additions
Intangible assets 171 378 299 - 848
Tangible assets 1,258 826 261 - 2,344
--------------- ---------- ---------- --------------- ------------
1,428 1,204 560 - 3,192
=============== ========== ========== =============== ============
Medical MII results include the acquisition of Tecmag which contributed GBP772,000 Group revenue
and GBP13,000 profit after tax respectively (note 5).
Energy Energy Medical Unallocated
Year ended 31 May 2018 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 15,194 20,096 10,410 - 45,700
After Market 21,581 11,583 - - 33,164
--------------- ---------- ---------- --------------- ------------
Revenue 36,775 31,679 10,410 - 78,864
=============== ========== ========== =============== ============
Operating profit/(loss) (1,532) 425 (109) (2,626) (3,842)
Net finance costs (656)
Taxation 12
------------
Loss after tax from continuing operations (4,486)
============
Segment non-current assets 37,636 27,174 4,810 - 69,620
Segment current assets 23,484 22,322 3,645 2,678 52,129
--------------- ---------- ---------- --------------- ------------
Segment liabilities (28,632) (15,933) (2,572) (5,536) (52,673)
--------------- ---------- ---------- --------------- ------------
Net assets 32,488 33,563 5,883 (2,858) 69,076
=============== ========== ========== =============== ============
Non-current asset additions
Intangible assets 10 255 447 - 712
Tangible assets 1,438 854 362 - 2,654
--------------- ---------- ---------- --------------- ------------
1,448 1,109 809 - 3,366
=============== ========== ========== =============== ============
Notes to the Preliminary Statement (continued)
31 May 2019
Geographical
2019 2018 2019 2018
Non-current Non-current
Revenue Revenue assets Assets
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 38,592 31,970 50,660 49,981
Europe (excl UK) 11,057 7,197 - -
United States of America 14,045 14,210 14,455 17,792
Africa & Middle East 3,867 2,766 - -
Americas & Caribbean (excl US) 3,228 1,190 - -
China 10,240 5,286 2,018 1,841
Asia Pacific (excl.China) 24,487 16,117 17 6
Rest of World - 128 - -
105,516 78,864 67,150 69,920
========= ======= =========== ===========
The Group had Energy - EPM revenue of GBP12,336,000 (2018:
GBP6,987,000) with a single external customer which represented
more than 10% of the Group's revenue.
2 Adjusted Earnings before interest, tax, depreciation and amortisation
2019 2018
GBP'000 GBP'000
Profit/(loss) before tax from continuing operations 3,144 (4,498)
Share based payment expense 98 69
Acquisition costs 89 1,567
Restructuring costs 395 1,699
(Gain)/loss on derivatives (83) 172
Unwinding of discounting on dilapidation provision 85 62
Amortisation of intangibles from business combinations 1,595 3,303
------- -------
Adjusted profit before tax 5,323 2,374
Finance income (132) (36)
Finance cost 616 692
Loss on derivatives/unwinding of discounting on dilapidation provision (2) (234)
------- -------
Adjusted profit before interest, tax and amortisation from business combinations ('EBITA') 5,805 2,796
Depreciation 3,240 2,532
Amortisation of other intangible assets 393 375
Adjusted Earnings before interest, tax, depreciation and amortisation ('EBITDA') 9,438 5,703
======= =======
The Directors believe that the above adjusted earnings are a
more appropriate reflection of the Group performance.
3 Taxation
2019 2018
GBP'000 GBP'000
Current tax 1,344 1,156
Deferred tax (711) (1,168)
633 (12)
======== ========
Notes to the Preliminary Statement (continued)
31 May 2019
4 Earnings per ordinary share
2019 2018
Number Number
Weighted average number of shares - basic 31,225,440 27,952,066
Share option adjustment 340,920 360,448
Weighted average number of shares - diluted 31,566,360 28,312,514
============ ==========
2019 2018
GBP'000 GBP'000
Profit/(loss) from continuing operations 2,511 (4,486)
Share-based payments expense 98 69
Acquisition costs 89 1,567
Restructuring costs 395 1,699
(Gain)/loss on derivatives (83) 172
Unwinding of discounting on dilapidation provision 85 62
Amortisation of intangibles from business combinations 1,595 3,303
Adjusted earnings attributable to shareholders 4,690 2,386
============ ==========
Basic earnings/(loss) per share 8.0p (16.0)p
Adjusted basic earnings per share 15.0p 8.5p
Diluted earnings/(loss) per share 8.0p (16.0)p
Adjusted diluted earnings per share 14.9p 8.4p
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 490,000 share options at 31 May 2019 (2018: nil) that
are not included within diluted earnings per share because they are
anti-dilutive.
Notes to the Preliminary Statement (continued)
31 May 2019
5 Acquisitions
Business combination - Tecmag Inc
On 22 October 2018 the Group acquired 100 percent of the issued
share capital of Tecmag Inc. for $1. The acquisition was made to
enhance the Group's position in the Medical division. The net
assets at the date of acquisition were as follows:
Fair value of assets and liabilities acquired GBP'000
Property, plant and equipment -
Inventories 151
Trade and other receivables 105
Cash and cash equivalents 40
Trade and other payables (95)
Borrowings (170)
Provisions (31)
-------
Net assets -
Business combinations intangibles assets identified -
Goodwill & IP -
-
=======
Fair value of consideration transferred:
Cash 132
-------
Consideration 132
Acquisition costs charged to expenses 89
-------
Net cash paid relating to the acquisition 221
=======
Acquisition costs arising from this transaction of GBP89,000
have been included in administration expenses included in overheads
before operating profit.
The impact of the Tecmag acquisition on the Consolidated
income statement is as follows: GBP'000
Revenue 772
Gross profit 423
Overheads (403)
--------
Operating profit 20
Finance costs (7)
--------
Profit before taxation 13
Taxation -
--------
Overall effect on the Consolidated income statement 13
========
Since acquisition Tecmag contributed the following to the Group's cashflows: 2019
GBP'000
Operating cashflows (95)
Investing activities (72)
Financing activities 77
Notes to the Preliminary Statement (continued)
31 May 2019
6 Events after the balance sheet date
Booth Industries
On 10 June 2019 the Group acquired the trade and certain assets
of Booth Industries Limited for total consideration of GBP1.8
million. In the 7 months to April 2019 Booth Industries had
turnover of GBP4,537,000 and a trading loss before tax of
GBP752,000 before exceptional costs of GBP358,000.
Business combination - Energy Steel
On 24 June 2019 the Group acquired 100 percent of the issued
share capital of Energy Steel & Supply Co. for $0.6m with no
debt assumed and $70k of associated transaction costs incurred. In
its previous financial year Energy Steel & Supply Co. had
turnover of $8.3m and a trading loss before tax of $1.6m.
Management are assessing assets and liabilities purchased and
are unable to confirm the value, given that they are currently in
the process of reviewing the records of the business.
7 Net debt and gearing
The gearing ratio at the year-end is as follows: 2019 2018
GBP'000 GBP'000
Debt (10,932) (13,708)
Cash and cash equivalents 8,909 6,565
---------- ----------
Net debt (2,023) (7,143)
Equity 69,294 69,076
---------- ----------
Net debt to equity ratio 2.9% 10.3%
========== ==========
8 Preliminary statement and basis of preparation
This preliminary statement, which has been agreed with the
auditors, was approved by the Board on 17 September 2019. It is not
the Group's statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
The statutory accounts for the two years ended 31 May 2019 and
2018 received audit reports which were unqualified and did not
contain statements under s498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 May 2018 have been
delivered to the Registrar of Companies but the 31 May 2019
accounts have not yet been filed.
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 European
Union 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, except for adoption
of IFRS 15 and IFRS 9, are set out in the statutory financial
statements for the year ended 31 May 2019.
9 Annual report and Accounts
The Report and Accounts for the year ended 31 May 2019 will be
available on the Group's website www.avingtrans.plc.uk on or around
7 October 2019. 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 14 November 2019 at 11:00am
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR MMGMLVNDGLZM
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