TIDMAVG
RNS Number : 2998N
Avingtrans PLC
29 September 2021
29 September 2021
Avingtrans Plc
("Avingtrans", the "Company", or the "Group")
Preliminary Results for the year ended 31 May 2021
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
2021.
Financial Highlights
-- Revenue from continuing operations increased by 7.1% to GBP98.5m
(2020 (2) : GBP92.0m)
-- Gross Margin improved to 30.4% (2020 (2) : 26.8 %)
-- Adjusted(1) EBITDA from continuing operations increased by
78.5% to GBP12.5m (2020 (2) : GBP7.0m)
-- Adjusted(1) PBT from continuing operations increased to GBP7.7m
(2020 (2) : GBP2.6m)
-- Adjusted(1) Diluted earnings per share from continuing operations
were boosted to 22.4p (2020 (2) : (8.0p)
-- Peter Brotherhood sold for an enterprise value of GBP35.0m
-- Net Cash excluding IFRS16 GBP23.3m (Net Debt 31 May 2020: GBP7.4m)
-- Dividend re-instated at 4.0p per share
(1) Adjusted to add back amortisation of intangibles from
business combinations, acquisition costs and exceptional items
(2) 2020 Restated for discontinued Peter Brotherhood
Operational Highlights
Energy
-- Revenue increased 11.1% to GBP89.0m (2020 (2) GBP80.1m)
-- Energy Steel continues to recover positively
-- Award of outline planning permission for HT Luton site
-- Successful disposal of Peter Brotherhood
-- Enhanced contract to supply the important 3M3 boxes - up by
GBP20m to GBP70m
-- Record order book for Booth
Medical
-- Revenue decreased to GBP9.6m (2020: GBP11.9m) as pivot away
from third party component manufacture
-- Division transformed into a niche MRI market player, following
acquisition of majority stake in Magnetica
-- Potentially significant market opportunities in orthopaedic
and veterinary imaging
Commenting on the results, Roger McDowell, Chairman, said:
"The Group forged ahead despite continuing adverse impact from
Covid-19 and we ended the year with record adjusted profits and a
solid cash position. Once again, our Pinpoint-Invest-Exit Strategy
("PIE") has proved its worth with the successful sale of Peter
Brotherhood delivering excellent returns for our shareholders. This
is a great credit to our management team and excellent staff across
all of our businesses and my thanks go to them for their very
significant efforts and achievements and the support of our
stakeholders."
Enquiries:
Avingtrans plc 01354 692391
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Singer Capital Markets (Nominated Adviser) 02074 963000
Shaun Dobson/Alex Bond (Corporate Finance)
Rachel Hayes (Corporate Broking)
IFC Advisory (Financial PR) 020 3934 6630
Graham Herring
Tim Metcalfe
Zach Cohen
About Avingtrans plc:
Avingtrans designs, manufactures and supplies original
equipment, systems and associated aftermarket services to the
energy, medical and industrial markets worldwide.
Business units
Hayward Tyler - Luton & East Kilbride, UK and USA, China and
India
Specialises in the design, manufacture and servicing of performance-critical
motors and pumps for challenging environments.
Energy Steel, Inc - Rochester Hills, Michigan, USA
Provider of custom fabrications for the nuclear industry, specialising
in: OEM parts obsolescence; custom fabrications; engineering
design solutions; product refurbishment; on-site technical support.
Stainless Metalcraft Ltd - Chatteris, UK and Chengdu, China
Provider of safety-critical equipment for the energy, medical,
science and research communities, worldwide, specialising in
precision pressure and vacuum vessels and associated fabrications,
sub-assemblies and systems.
Booth Industries - Bolton, UK
Designs, manufactures, installs and services doors and walls
which can be tailored to be: blast and explosion proof; fireproof;
acoustically shielded; high security/safety; or combinations
of the above.
Ormandy Group - Bradford, UK
Design, manufacturers and servicing of off-site plant, heat exchangers
and other HVAC (heating, ventilation and air conditioning) products.
Composite Products Ltd - Buckingham, UK
Centre for composite technology, parts and assemblies, serving
customers in industrial markets.
Magnetica Ltd - Brisbane, Australia
Magnetica Limited specialises in the development of next generation
MRI technologies, including dedicated extremity MRI systems and
MRI system components. Magnetica has successfully built and tested
a compact, integrated 3 Tesla orthopaedic MRI system, demonstrating
clinical-quality imaging. Commercialisation of this system (and
others) is on-going. Magnetica's structure now includes two other
business units:
Scientific Magnetics - Abingdon, UK
Designs and manufactures superconducting magnet systems and associated
cryogenics for a variety of markets including MRI and provides
services for Nuclear Magnetic Resonance instruments.
Tecmag Inc - Houston, USA
Designs, manufactures and installs instrumentation, including
consoles, system upgrades, and probes, mainly for Magnetic Resonance
Imaging (MRI) and Nuclear Magnetic Resonance (NMR) systems.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of those Regulations.
Chairman's Statement
Despite some adverse effects from the Covid-19 pandemic, the
Board was pleased with the Group's performance for the year, with
record adjusted EBITDA (note 2) from continuing operations and a
very solid net cash position at year end, driven by the successful
disposal of Peter Brotherhood Limited (PB) in March 2021, for an
enterprise value of GBP35m. It is pleasing to note a number of
important new order wins, both in the year and post-period end,
which have bolstered the order book going into FY22.
Crucially, our Pinpoint-Invest-Exit ("PIE") strategy came to the
fore once again, not only in the disposal of PB, but also in the
recovery progress at Booth and Energy Steel and in the acquisition
of a majority stake in Magnetica (MNA) in Australia. Shareholders
will recall that the assets of Booth Industries in Bolton, UK and
Energy Steel in Michigan, USA were acquired in June 2019. Since
then, both of these turnaround opportunities have made good
progress, with Booth, in particular, now contributing strongly to
Group results.
The divisional management teams have again demonstrated their
agility and resilience in the period, continuing to build strong
business platforms, despite the disruptions due to Covid-19. These
effects caused us to enact certain targeted restructuring and other
changes, to optimise business performance. Nonetheless, our focus
remains on growing strong and valuable businesses.
Aftermarket growth in Engineered Pumps and Motors (EPM) and
Process Solutions and Rotating Equipment (PSRE) remains central to
developing robust value propositions, in order to support OEM and
end-user customers. The end-user access provides a more predictable
and repeatable pipeline, drives improved profitability and
underpins product and service development.
The EPM division delivered an improved result for the year,
despite some on-going Covid-19 disruptions to supply chains and
order placement. Energy Steel continued to recover positively, with
good aftermarket prospects and moved to a smaller, optimal facility
at the year end. The award of outline planning permission for the
Hayward Tyler ("HT") Luton site was good news, providing us with
the opportunity to optimise HT's UK operations, whilst potentially
producing a net surplus for the Group when the site is exited.
However, this process has been delayed by Covid-19.
The PSRE division pushed through the impact of Covid-19 and
capped an excellent year with the successful disposal of Peter
Brotherhood. The division refined its offering to the UK nuclear
market - especially to Sellafield for nuclear decommissioning -
whilst also using this capability to position itself for longer
term new nuclear technologies. Post period end, we were delighted
to confirm the transition of the important 3M3 box contract with
Sellafield to the volume production phase and with an enhanced
contract value, up by GBP20m to GBP70m. The integration of Booth
has gone better than planned and the business is rapidly returning
to full heath, with a record order book, including the stellar
GBP36m contract win with HS2. Covid-19 buffeted Ormandy more than
most in the financial year, but the business still turned out a
decent result and we anticipate further improvements this year.
Meanwhile, the Medical and Industrial Imaging (MII) division has
metamorphosed into a niche MRI player, following the acquisition of
a majority stake in Magnetica and its merger with Scientific
Magnetics and Tecmag. This exciting development has created a
start-up MRI systems manufacturer, with eyes on alluring market
prospects in orthopaedic and veterinary imaging, for example. The
refocused division will continue to produce associated products in
nuclear magnetic resonance and scientific magnets, in support of
the core strategy. These developments are still at a relatively
early stage, but the Board is excited about the long-term potential
of the division, which is expected to yield longer term positive
returns for the Group, albeit perhaps using a different vehicle to
maximise returns than our usual "PIE" process for mature
businesses.
Given the excellent overall results for the year, the Board
believes that it is now right to reintroduce a full year dividend
of 4.0 pence per share, which includes an element of catch up for
the missing interim dividend, suspended due to Covid-19.
As well as the final dividend proposed, we intend to return to
our commitment to long term shareholder returns in FY22, with both
interim and final dividend payments in prospect. Our resilient view
of the overall prospects for the Group, underpinned by our prudent
approach to debt and financial headroom, support this decision.
Given the robust balance sheet position, the Group continues to
seek further shareholder value enhancing M&A opportunities.
Finally, I warmly welcome all the staff at Magnetica to
Avingtrans and congratulate them and all Avingtrans employees for
the dedication and determination that they have displayed in a
challenging environment. We also wish our former colleagues at PB
well, as they continue their success story now as part of Howden.
On behalf of the shareholders, I once again thank all Avingtrans
employees for their commitment to the Group during the past year,
as we look forward with eagerness to FY22.
Roger McDowell
Chairman
28 September 2021
Strategy and business review
Group Strategy
Our core strategy is to buy and build engineering companies in
niche markets, particularly where we see turnaround and
consolidation prospects; a strategy we call Pinpoint-Invest-Exit
("PIE"). We have had a strong track record in returning significant
shareholder value over the past decade and FY21 was another
successful year, with the January 2021 acquisition of a majority
stake in Magnetica and the disposal of Peter Brotherhood in March
2021.
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 Covid-19 - 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, particularly in light of Covid-19
and the effect of acquiring a start-up business during the
year.
The Group is focused on the global Energy and Medical markets,
both of which play into some of the world's mega-trends, such as:
urbanisation; an ageing population; and an accelerating transition
towards a cleaner and healthier planet.
Divisional Strategies
Engineered Pumps and Motors (Energy - EPM): EPM continues to
develop its nuclear installed base (civil, defence and national
security) - notably for life extension applications - and its
offering to the hydrocarbon market sectors. Energy Steel in North
America (acquired in June 2019), which specialises in nuclear life
extension, continues to recover well. In addition, the EPM business
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. During FY21, EPM
delivered a number of key contracts, including pumps for next
generation nuclear business TerraPower in the USA and pumps for a
major new concentrated solar power plant in Dubai. Partnership
agreements (eg with Ruhrpumpen and Shinhoo) are an important
element of the EPM strategy, providing us with a broader product
portfolio and cross-selling opportunities.
Process Solutions and Rotating Equipment (Energy - PSRE): Here,
the primary strategy is to develop a comprehensive offering to the
nuclear decommissioning and reprocessing markets, building on the
long-term contracts to build nuclear waste storage containers and
the installed base of equipment across the vast Sellafield site.
Post period end, Metalcraft and Sellafield Limited entered into the
second phase of the contract to provide high integrity stainless
steel storage boxes for Sellafield. The 3M3 ('three metre cubed')
box contract is now worth up to GBP70m, being a GBP20m uplift to
the original contract awarded in 2015. During the year, the
division's nuclear credentials were enhanced by the strong recovery
of Booth Industries, which also broadened our market reach into
Critical National Infrastructure (CNI). Amongst others, Booth won a
major new multi-year contract with HS2 in the period, worth GBP36m.
The PSRE division is witnessing a strong pipeline and remains well
poised to bid for and capitalise on opportunities as they
arise.
Medical and Industrial Imaging (Medical - MII): Following the
Magnetica acquisition in January 2021, the focus for the medical
division pivoted towards becoming a niche market leader in the
production of compact helium-free MRI systems, for applications
such as orthopaedic and veterinary imaging. This is an exciting
opportunity for the Group. In parallel, we have moved to exit from
volume MRI components supply to customers such as Siemens,
preferring to concentrate on our own product development. In
support of the core strategy, the division will continue to work on
niche Nuclear Magnetic Resonance (NMR) and scientific magnet
products and services, since these are complementary
technologies.
The common theme which we are seeking to develop across the
energy and medical divisions, is the continued pressure on
aftermarket expenditure, where operational efficiency, reliability
and safety are paramount and operators are looking to their supply
chain partners to provide long term support of both new
infrastructure and legacy installations
Pinpoint-Invest-Exit
Continuing our Pinpoint-Invest-Exit strategy, Avingtrans
acquired a majority stake in Magnetica (AUS), in January 2021,
merging this with our other MRI related businesses, Scientific
Magnetics (UK) and Tecmag (US). The objective is to create an
innovative niche MRI systems manufacturer, with the technology to
drive new MRI imaging applications and business models. To date the
integration of the three businesses is on track and making good
progress towards commercial product availability. The integrations
of FY20 acquisitions, Booth and Energy Steel, both went well during
FY21 and they were each able to deliver a profit for the Group,
with Booth's recovery being very robust and ahead of management's
expectations.
During the period, we obtained Outline Planning Permission (OPP)
for the redevelopment of our HT Luton site, comprising up to 1,000
residential units. Covid-19 has delayed our plans with respect to
the site and discussions are ongoing.
M&A activity in energy capital goods markets has been
surprisingly robust despite Covid-19 and businesses like ours
continue to command high valuations. This was evidenced by the
March 2021 disposal of Peter Brotherhood, which was acquired for
GBP9m, as part of the Hayward Tyler Group in 2017. The disposal was
for GBP35m enterprise value - almost four times the price paid for
the business in a four year period. This demonstrates the validity
of the PIE model and our approach to business turnaround.
Consequently, Avingtrans remains confident about the current
strategic direction and potential future opportunities across its
chosen markets.
Markets - Energy
The global demand for energy experienced a hiatus, due to
Covid-19, but we believe that we will see a consistent return to
growth now and the effect of the pandemic may be to drive faster
towards increased efficiency and decarbonisation. This trend may
benefit our businesses in the nuclear and renewables sectors.
End User/Aftermarket
Operators and end-users demand a blend of quick response through
local support and a requirement to drive improvements through
equipment upgrades and modernisation. In the West, where facilities
are being operated for longer than their intended design lives,
there is a strong demand for solution providers in the supply chain
to partner with end-users for the longer term. The Avingtrans
energy divisions are well positioned to grow in this end-user
market space.
Nuclear
Nuclear energy as a low carbon, baseload power source remains an
asymmetric market with respect to future growth. Almost all the
1GW+ new build opportunities are currently in Asia, with the
exception of the limited UK programme. However, we are still
experiencing buoyant market segments, including supporting the
operational fleet, continued safe operation and life extensions,
decommissioning and reprocessing. We are also working on the
long-term development of the next generation of technologies, such
as Small Modular (SMR), or Advanced Generation IV Reactors - eg
with TerraPower. 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 94 reactors generating around 30 percent of the world's
nuclear electricity. Coupled with the heritage Westinghouse
technology operating in Europe and Asia, the EPM division's
long-standing position in this market provides opportunities for
further growth. Obsolescence and life extension are key issues for
nuclear operators worldwide and the Avingtrans Energy Divisions are
well positioned to support operators in addressing this critical
risk. The acquisition of Energy Steel in the USA in 2019 further
bolstered 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, South
Korea, the USA and China dominating development activity. The Group
views these new technologies as an attractive route forward for
nuclear and is well positioned to develop as a global industry
partner.
Power Generation
The world continues to electrify, with an increasing amount of
primary energy going to the power sector, which remains a key focus
across the Group's energy divisions. Aside from nuclear, the main
sub-sectors are as follows:
- Coal - the Group continues to see good aftermarket activity
from coal fired power stations even though the demand for new power
stations is in decline. Opportunities still exist in India, China,
South East Asia, Eastern Europe and the Middle East. EPM is
optimising its product line, to take market share and to create
tomorrow's aftermarket.
- Gas - natural gas, primarily in the form of combined cycle gas
turbine power plants is a growing market space, primarily in the
West. 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 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.
Hydrocarbons
The Covid-19 pandemic had a dramatic effect on oil & gas
supply and demand, with the Brent crude price collapsing in 2020
and now trading in the range of $ 70 to $ 7 5 per barrel, with most
informed forecasts suggesting a n on-going recovery . As a result ,
new capital expenditure in this sector w as materially reduced and
has not yet recovered to pre-covid levels. Therefore, our forecasts
must continue to exhibit prudence , with some limited restructuring
activity in EPM being completed in the first half of FY21 in
response to the market conditions. However, aftermarket orders
continue to be won, so there is some positive news in this
area.
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 has continued to develop and refine its
capabilities in this regard, having launched its first monitoring
product, DataHawkTM, three years ago.
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 $33.5bn by 2024,
according to Markets and Markets and is expected to continue to
grow at over 5% per annum over that period. The largest market is
the USA, followed by Europe and Japan. The fastest growing markets
are China and India.
Following the acquisition of a majority stake in Magnetica (AUS)
in January 2021, we merged Magnetica with Scientific Magnetics (UK)
and Tecmag (US). The objective of this pivot is to create an
innovative, niche-MRI systems supplier, which can address specific
parts of the market, not well served by dedicated products at
present. This includes orthopaedic and veterinary imaging. Although
Magnetica is primarily targeting the Magnetic Resonance Imaging
(MRI) market, Nuclear Magnetic Resonance (NMR) continues to be of
interest, 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 itself is approximately 18% by value of the total diagnostic
Imaging market and is projected to grow at 6% p.a. (Grand View
Research). NMR is a smaller market, currently estimated at $861m
p.a. by Marketwatch and is projected to grow at over 3% p.a. until
2026, with Bruker enjoying a dominant market share.
End User/Aftermarket
The MRI market segment is dominated by a handful of
manufacturers, including GE, Siemens, Philips and Canon, who
account for circa 80% of revenue globally. These players also
dominate the aftermarket, though there are a few independent MRI
service businesses in existence. Avingtrans is not present in the
MRI aftermarket at this time.
The NMR market is similar, currently dominated by Bruker and
Jeol. Avingtrans is aligned with MR Resources Inc, a
well-established US business, which services the NMR
aftermarket.
MRI
As noted above, the MRI market segment is dominated by a handful
of global manufacturers, and we do not intend to compete with them.
However, following the planned pivot to niche full system supply
noted above, Avingtrans has moved in parallel to exit component
supply and this process has advanced materially in the year. We
anticipate a temporary reduction in divisional revenues, as
component manufacture ends, since there will then be a gap before
we launch our own systems. Our first target is orthopaedic imaging,
where encouraging development of our prototype system is on-going.
We currently anticipate commercial launch of this product during
2023, subject to regulatory approval in target markets.
NMR
We are aligned with recent market entrant Q One Instruments,
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.
Operations
Operational Key Performance Indicators (KPI's)for continuing
operations
2021 2020
Percentage of total continuing revenue deriving
from aftermarket (AM) sales (%) 41.4 42.7
Customer quality - defect free deliveries (%) 98.9 98.0
Customer on-time in-full deliveries (%) 69.8 78.1
Annualised staff turnover including restructuring
(%) 22.0 14.6
Health, Safety and Environment incidents per head
per annum 0.07 0.09
The AM sales % has reduced marginally. This is mainly due to the
lack of access to US nuclear plants, caused by Covid-19. Covid-19
delays also continued to affect AM order timings - especially at
EPM, in the nuclear aftermarket. For customer quality, we sustained
our usual high level of defect free deliveries, though on time
deliveries fell back in the year, again due to Covid-19 induced
supply chain disruption Annualised staff turnover increased, due to
restructuring at EPM (caused by Covid-19 effects on the oil and gas
market) and at Metalcraft (driven by our exit from the MRI
component manufacturing business). The long-term positive reduction
of HSE incidents continues, though each new acquisition presents us
with fresh HSE challenges.
EPM Division - Energy
For the EPM division, which represents the bulk of the former
Hayward Tyler companies, the main priorities remain to strengthen
the aftermarket capabilities and to maximise opportunities in the
nuclear life extension market.
The division's results improved in the period, having been
disrupted by Covid-19 in the prior year. Whilst some adverse
Covid-19 effects lingered into FY21, the impact was less pronounced
than previously, so EPM was able to make headway once more.
At HT Luton, a targeted, largely voluntary, restructuring
programme was implemented early in the period. This was necessary
because Covid-19 badly disrupted the market for new capex into oil
and gas. However, aftermarket activities continue to build,
including the servicing of third party equipment. The GBP10m
contract in Sweden with Vattenfall for the Forsmark plant (for
nuclear life extension) made good progress overall and is expected
to complete in FY22. Further defence orders have been received and
are being executed on target. Following the receipt of planning
permission to develop the HT Luton site into up to 1,000 dwellings
in the period, plans are underway to move the business to a new,
optimised location, although this process was also delayed by
Covid-19 effects outside of our control.
HT Inc in Vermont (USA) continues to see solid order intake in
the nuclear life extension market in the USA - and again with KHNP,
South Korea, although delays in order intake (due to Covid-19
affecting customer site access) did impact the US results again. HT
Inc's new R&D opportunities - in next generation nuclear power
and concentrated solar power - are also making good progress, with
first products shipped to TerraPower in the period.
HT Kunshan (China) delivered their contract in China (worth
GBP2.2m) in the period for specialist pumps being installed in a
major new concentrated solar power plant in Dubai. This renewables
market sector has several good prospects for follow-on from this
initial win.
HT India continued to suffer from order and delivery delays and
disruptions due to Covid-19, but the business was still able to
record a modest profit in the period.
Energy Steel ('ES') in Michigan (USA), continued to progress on
its recovery path, chalking up another small profit, in the period.
Importantly, at the end of the year, ES completed a move to a new
smaller facility, thus reducing overheads going forward and
rightsizing its capacity. The integration of sale with HTI is now
complete and the business has started to win new orders from
previously untapped customers, including orders deriving from a
nuclear "orphan" IP acquisition.
PSRE Division - Energy, safety and security
PSRE had another very good year, helped along by the successful
disposal of PB for GBP35m enterprise value in March 2021. The
results of the continuing businesses were supported by a strong
recovery at Booth, which now has a record order book, including the
HS2 GBP36m contract awarded in the period. Booth also made progress
with its factory extension, though construction was delayed
materially by Covid-19. The blast and security high integrity doors
niche which Booth occupies, is one which we can defend vigorously,
to rebuild Booth into a leader in its chosen markets, both in the
UK and now internationally.
Metalcraft's progress with the Sellafield 3M3 boxes was again
steady- and our progress was rewarded (post period end) by the
confirmation by Sellafield of our transition to phase two of the
box contract. The contract value was also boosted to GBP70m
(previously GBP50m) with circa 1000 boxes to be delivered over the
next six years. Metalcraft is the only supplier to transition to
phase two of the contract. The next 3M3 box contract tender has now
been even further delayed due to Covid-19 disruptions to
Sellafield's plans. This delay is disappointing, but we are now
very well placed to pursue this contract later and it does not
impact on our forecasts, which allow for unexpected customer
delays.
Ormandy's performance was pleasing in the year, since it was
more disrupted by Covid-19 than other business units. Nonetheless,
the HVAC market held up and a strengthened sales team improved
results and the business is well-placed for the future.
The Fluid Handling business in Scotland is a consistently good
performer and continues to build a wider nuclear capability. In the
period, this unit won its biggest ever order (GBP2.5m) for
Sellafield, to repair and upgrade remotely monitored valves.
Further life extension and decommissioning opportunities are being
pursued. Post period end, a contract worth GBP4.4m was secured with
Doosan, as a prime contractor for Sellafield. This was notable,
because it required Fluid Handling, to work with Metalcraft and HT
Luton, to secure the order.
MII - Medical Division
MII is a division in pro-active transition. We have been pivoted
away from the custom business previously targeted by Scientific
Magnetics (SM) and working towards new products in Magnetic
Resonance Imaging (MRI), driven by the acquisition of a majority
stake in Magnetica (MNA) in January 2021. With MNA, SM and Tecmag
now all integrating as one business, the focus is fully on
niche-MRI systems and we are making good progress on this exciting
major project.
MNA will continue to work on products for the adjunct Nuclear
Magnetic Resonance (NMR) market, including service and support
offerings with our third party partners.
In parallel with our pivot to MRI systems, Metalcraft's UK and
China business for MRI components was being gradually wound down
and this process will conclude in FY22. Therefore, the remainder of
this operation has recombined with its sister unit in PSRE, to
simplify reporting there.
Composite Products had a good year, with increasing deliveries
to Rapiscan for package scanning equipment and the development of
other customers, such as Arrival for electric vehicle composite
components. Again, due to the focus on MRI in the medical division,
it is now a better fit for Composite products to move into the PSRE
division.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators
to monitor the business, as set out below (all items are "from
continuing operations" after restating for discontinued PB).
Revenue: 7.1% increase - good underlying organic growth
Overall Group continuing revenue increased to GBP98.5m (2020:
GBP92.0m), driven by organic growth in the EPM and PSRE divisions
and despite some on-going contract delays caused by Covid-19.
Profit margin: another significant improvement in results,
despite Covid-19
Adjusted EBITDA (note 2) increased by 78.5% to GBP12.5m (2020:
GBP7.0m). PSRE was boosted by strong results across the division
and a robust return to profit at Booth. The profit margins in the
EPM division also continued to improve, following some
restructuring caused by the Covid-19 impact on oil and gas
markets.
Operating profit was GBP6.1m (2020: profit GBP0.6m), in line
with the EBITDA improvement seen above.
Gross margin: strong progress, with Booth now contributing
positively
Group gross margin improved to 30.4% (2020: 26.8%) due to the
improving gross margin mix from the former HTG business units and
the recovery at Booth, as our transformation programme continues to
bear fruit.
Tax: future profits and cash protected by available losses
The effective rate of taxation at Group level was a 7.0% tax
charge. A tax refund due in the US kept the charge lower than
expected and the use of brought forward losses in the UK. The tax
position will be aided further in the coming years by utilisation
of losses in the UK and China. We continue to be cautious, not
recognising all of the potential trading tax losses in the UK.
Adjusted diluted Earnings per Share (EPS): a 181%
improvement
Adjusted diluted earnings per share from continuing operations
(note 4) was boosted to 22.4p (2020: 8.0p) reflecting the
underlying growth in results and PB being restated as a
discontinued operation. Including 73.9p from the disposal of PB and
discontinued operations resulted in Adjusted diluted earnings per
share attributable to Shareholders of 96.2p (2020: 16.2p).
Basic and diluted earnings per share attributable to
Shareholders increased to 85.4p (2020: 4.4p) and to 83.6p (2020:
4.3p).
Funding and Liquidity: substantial net cash position, following
Peter Brotherhood disposal
Net cash (including IFRS16 debt) at 31 May 2021 was GBP20.3m
excluding IFRS16 debt, net cash was GBP23.3m (31 May 2020: net
debt: GBP16.4m excluding IFRS16 debt at 31 May 2020 was GBP7.4m).
The cash flows generated from the strong underlying profits were
partly absorbed by a GBP2.2m working capital outflow, partly due to
the envisaged further working capital outflow for the ES and Booth
acquisitions, the timing of various contracts and a lower level of
advance payments, resulting in an operating cash inflow of GBP6.4m
for the year (2020 outflow GBP0.1m). In addition the cash
inflowGBP26.6m (net of disposal costs) generated on the disposal of
PB meant the Group moved into a substantial net cash position . The
Directors consider that the Group has sufficient financial
resources to deliver strategy, so the Group is actively looking for
further value enhancing opportunities.
Dividend: full year progressive dividend reinstated
The Board believes that it is now appropriate to reinstate the
full year dividend and proposes a dividend of 4.0p per share (2020:
Nil p - suspended due to Covid-19). We return to our commitment to
long term shareholder returns via dividends from this year and we
also intend to reinstate progressive interim and final dividends
for FY22. The dividend will be paid on 10 December 2021 to
shareholders on the register at 29 October 2021.
People
There were no changes at Board level in the period. Top level
divisional management teams were largely unchanged. The management
teams in each of the three divisions continue to be strengthened,
with a number of key appointments being made in the year. The
recruitment emphasis remains on the importance of the aftermarket
opportunities. Skills availability is always a challenge, more so
after Brexit and the effects of Covid-19. However, we do not expect
to be unduly constrained by shortages, given the global economic
situation. The Group continues to invest significant effort in
developing skills in-house, through structured apprenticeship
programmes and graduate development plans.
Our workforce is becoming ever more integrated and this provides
additional capability, capacity and innovative thinking, to support
our global blue-chip customer base.
Environmental, Social and Governance (ESG) Report
Avingtrans believe that operating in a safe, ethical and
responsible manner is at the heart of creating sustainable value
for all our stakeholders.
Our goal is to embed sustainability into our
pinpoint-invest-exit business strategy. In 2021, we have reassessed
our approach to sustainability with a view of integrating a
sustainability strategy within our core business activities,
aligning ourselves with the UN's Sustainable Development Goals
(SDGs).
The SDGs set out the UN agenda for people, planet and
prosperity, aim to achieve a prosperous, inclusive and sustainable
society for all by 2030.
The SDGs provide all businesses with a new lens through which to
translate the world's needs and ambitions into business solutions.
These solutions will enable companies to better manage their risks,
anticipate consumer demand, build positions in growth markets,
secure access to resources, and strengthen their supply chains,
while moving the world towards a sustainable and inclusive
development path.
We have reviewed the SDGs alongside our operations and consider
the following to be our priorities:
- Health, safety, and wellbeing
- Operational eco-efficiency
- Development of new technologies
Environmental
The Group's environmental policy is to ensure that we understand
and effectively manage the actual and potential environmental
impact of our activities. Our operations are conducted such that we
comply with all legal requirements relating to the environment in
all areas where we carry out our business.
During the period covered by this report, the Group has not
incurred any significant fines or penalties, nor been investigated
for any significant breach of Environmental regulations.
Statement of carbon emissions - compliance with Streamlined
Energy and Carbon Reporting (SECR)
This is our first year of carbon reporting emissions under the
SECR regime. The group have elected to voluntarily disclose the
carbon reporting emissions under the SECR regime to provide
stakeholders with a clear understanding of the group's position
with regards to carbon emissions. In the year we have captured
energy use across our UK sites and it is our intention to include
all remaining (overseas) entities in our next annual report.
The Avingtrans business model is Pinpoint, Invest, Exit with
most businesses sold within a three to five year time frame. As a
result of our business model we expect to see significant
fluctuation in energy use each year.
The methodology for this assessment has used the 2020 and 2021
emission conversion factors published by Department for
Environment, Food and Rural Affairs and the Department for
Business, Energy & Industrial Strategy. The assessment follows
the location-based approach for assessing emissions from
electricity usage and has used the UK electricity emissions factors
(for generation and transmission and distribution).
The data in the tables below is drawn from our 7 locations in
the UK. Carbon reporting is aligned to our financial statements,
consequently we have excluded the results from our discontinued
operations.
The following highlights Avingtrans' emissions and intensity
ratios:
2021
Scope 1:
Gas 714
Oil 471
Distribution 103
Company car travel 3
----------------
1,291
Scope 2 - Purchased electricity 1,119
----------------
Total emissions tCO(2) e 2,410
================
Total energy consumption kWh 11,270,821
================
Intensity metrics:
Employees - UK sites 423
Emissions tCO(2) e per employee 5.7
Revenue (GBPm) - UK sites 60.0
Emissions tCO(2) e GBPm of revenue 40.2
Given the disruption to the operations in the year resulting
from the covid-19 pandemic (and this being the first year of
reliable data capture) we have not set Group goals at this point. A
number of our sites that hold the ISO 14001 environmental standard
are already working towards achieving their site-specific
goals.
Operational eco-efficiency
Operational eco-efficiency plays a key role in our business. It
supports our plan to maximise profitability, strengthen our
competitive position, and provide customers with the highest
quality of services. Our efforts to reduce energy use and prevent
pollution also support our commitment to our employees, the
environment, and the communities in which we are a part.
ISO 14001 Environment Management Systems
During the year Hayward Tyler China achieved the ISO14001
Environmental Management Systems accreditation, bringing the total
number of our sites with this accreditation to 6. This
accreditation ensures that our businesses are focused on their
environmental impact, supported by effective management
processes.
LED lighting systems
A significant proportion of our sites' energy consumption is
spent on lighting. We have been installing energy efficient LED
lighting systems across several of our sites. As well as improved
lighting efficiency, brighter lights improve employee safety, and
provide improved monitoring. At our latest installation, we expect
the new lighting to give 50% efficiency improvements on the
previous lighting, plus we expect further improvements to be
derived from the smart monitoring systems.
On-site power generation
On site power generation can significantly reduce the
environmental impact compared to purchasing power from the
grid.
At Peter Brotherhood, we installed a Combined Heat & Power
unit. The system burns natural gas to produce electricity and the
excess heat is used to warm the building and can be converted and
used for air conditioning. Excess electricity is sold back to the
grid. Following the disposal of PB, we are considering whether this
option is appropriate for other sites.
The significant footprint on some of our sites provides a good
opportunity for solar power. Our Luton business has already
installed a solar array to generate on site power there.
Development of new technologies
Next generation nuclear power: Small Modular Reactors
("SMRs")
SMRs are advanced power plants that can be largely built in
factories as modules to minimise costly on-site construction, and
which allow manufacturers to reduce costs by producing many
identical units. More than 70 designs of small modular reactor are
in development in 18 countries around the world, mostly based on
Gen III+ reactor technologies which are relatively close to
commercial readiness.
The UK arm of our Hayward Tyler business is collaborating with
the Nuclear Advanced Manufacturing Research Centre to develop a new
reactor coolant pumps (RCP) for small modular reactors (SMRs) and
help the UK supply chain prepare to produce critical components for
the global SMR market.
Next generation nuclear power: Molten Chloride Fast Reactor
("MCFR")
Our US Hayward Tyler business has developed high-temperature
molten salt pumps destined for a state-of-the-art Integrated
Effects Test (IET) facility, under development by Southern Company
and TerraPower to advance development of the Molten Chloride Fast
Reactor (MCFR). This is a transformational, fourth-generation,
molten salt nuclear technology, designed to enable low-cost,
economywide decarbonization. Located at TerraPower's Everett,
Washington facility, the IET is a non-nuclear, externally heated
multi-loop system intended to test and validate integrated
operation of MCFR systems as well as demonstrate multiple auxiliary
MCFR functions.
From fission to fusion
The giant fusion reactor, currently under construction in France
(ITER) will be used as a global demonstrator of fusion
technologies, in the lead up to eventual full-scale fusion power
plants. Like nuclear fission, fusion is free of carbon emissions
(except for construction), but also has the benefit of a much
smaller and less hazardous waste stream. Hayward Tyler in the USA
is working with the US government, to design and produce specialist
pumps for ITER, as part of the US contribution to the project.
Nuclear waste remediation: Sellafield 3m3 boxes
The extension of Metalcraft's 3m3 box contract with Sellafield
marks a transition to volume production of these containers. The
boxes will be used to store intermediate level waste ("ILW")
retrieved from silos at legacy locations in Cumbria. In
environmental terms, this storage project represents one of the
most positive and important intergenerational equity deliverables
of the next few decades, developing and implementing critical
technology to bequeath a pristine environment to posterity.
As part of this transition, Metalcraft will be producing circa
1,000 boxes over phase two of the programme, which is currently
expected to take 6 years. Since 2015, Metalcraft has invested to
create the only dedicated facility to supply boxes for ILW in the
UK. As a result, Metalcraft believes it is in a leading position to
tender for future decommissioning contracts at Sellafield over the
duration the site decommissioning.
Renewables: Concentrated Solar Power (CSP)
Hayward Tyler in China supplied a glandless pump package to a
major Chinese EPC, Shanghai Electric Corporation, for installation
at Bin Rashid Al Maktoum Solar Park Phase IV. This is a 950MW
Concentrated Solar Power (CSP) and Photovoltaic (PV) hybrid power
plant. The project makes use of three different technologies to
generate clean energy, consisting of 600MW from a parabolic basin
complex, 100MW from a solar tower, and 250MW from PV panels.
It is the world's largest project using Concentrated Solar Power
on a single location. The Dubai solar park is an important project
supporting the Dubai Clean Energy Strategy, which aims to increase
Dubai's use of clean energy to 75% of their total energy mix by
2050.
Magnetic Resonance Imaging (MRI): Going helium-free
Existing MRI systems rely on liquid helium, to cool the
superconducting magnets at the heart of each system. Helium is a
scarce, non-renewable resource, mostly obtained as a by-product of
oil extraction. Therefore, in our new compact MRI designs, we are
seeking to take advantage of the smaller system footprint, to
enable us to rely on mechanical cooling only, thus eliminating use
of helium entirely in these systems.
Social
Social Responsibility
It is paramount that the Group maintains the highest ethical and
professional standards across all of its activities and that social
responsibility should be embedded in operations and decision
making. We understand the importance of managing the impact that
the business can have on employees, customers, suppliers and other
stakeholders. The impact is regularly reviewed to sustain
improvements, which in turn support the long-term performance of
the business. Our focus is to embed the management of these areas
into our business operations, both managing risk and delivering
opportunities that can have a positive influence on our
business.
Employees
The Group places considerable value on the involvement of its
employees and has continued to keep them informed on matters
affecting them directly and on financial and broader economic
factors affecting the Group. The Group regularly reviews its
employment policies. The Group is committed to a global policy of
equality, providing a working environment that maintains a culture
of respect and reflects the diversity of our employees. We are
committed to offering equal opportunities to all people regardless
of their gender, nationality, ethnicity, language, age, status,
sexual orientation, religion or disability. We believe that
employees should be able to work safely in a healthy workplace,
without fear of any form of discrimination, bullying or harassment.
We have been rolling-out a "dignity and respect" training program
across the Group. We believe that the Group should demonstrate a
fair gender mix across all levels of our business, whilst
recognising that the demographics of precision engineering and
manufacturing remain predominantly male, which is, to an extent,
beyond our control.
Apprenticeships and training
All larger group locations are running apprenticeship schemes
for young people, both to act as socially responsible employers and
to optimise the demographics of our workforce over the mid to long
term. The most developed of these schemes is at Metalcraft in
Chatteris, UK, where the scheme there is very well established and
has won multiple national awards over the past several years. This
scheme is now being taken to another level (post-period end) with
Metalcraft being given planning permission to construct a new
training school on the Chatteris site, with construction work now
underway.
The centre will be funded through a GBP3.16million grant from
the Cambridgeshire and Peterborough Combined Authority and will
provide training across a range of vocational subjects for between
80 and 130 apprentices per year, for the entire local area
Health, safety, and wellbeing
The Group takes H&S matters and its related responsibilities
very seriously.
As regular acquirers of businesses, we find different levels of
capability and knowledge in different situations. Often, a key
investment need in smaller acquisitions is to spread H&S best
practice from other Group businesses and bring local processes up
to required standards. Larger acquisitions (such as HTG previously)
usually have well developed H&S processes and we seek to learn
from these in other business units.
Employee equality, welfare and engagement are critical for
developing our key asset. We focus on pro-active actions including
internal training, certifications, and employee engagement through
listening, survey and involvement.
Covid-19 has been the biggest health and safety issue for the
Group this year. Fortunately, the nature of our products and the
topography of our factories have given us a good base to work from,
to make our workplaces Covid-19 safe. We have an overall set of
guidelines to work to, derived from government policies around the
world and local teams in each business adapt these to the specifics
of their individual site. These measures include:
- Shielding of vulnerable employees
- Working from home where feasible
- Factory and office re-layouts to facilitate
social-distancing
- Enhanced cleaning and site hygiene
- Additional use of PPE equipment where necessary
- Minimisation and careful management of third-party visitors to
our sites
Where our employees have to visit other third party sites, they
have protocols from their business unit to follow and must also
adhere to the policies and procedures of the site which they are
visiting. Each business has a team responsible for ensuring that
the Covid-19 plan is kept up to date and adapted, if required, as
the circumstances of the pandemic continue to evolve. Taken as a
whole, these measures have allowed us to operate at a consistently
high level of effectiveness throughout the pandemic and ensured
that we have minimised any loss of output, whilst keeping all
employees safe.
Our Health and Safety KPIs can be found in the key performance
indices section of the strategic report. Health and Safety incident
reporting has improved across the Group and 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 H&S oversight and
he conducts inspections with local management as appropriate.
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 market niches. We will continue to be frugal
and seek to crystallise value and return capital when the timing is
right, as part of the PIE strategy implementation. Our PIE strategy
has served us well in the current crisis and could result in
further opportunities to grow shareholder value.
The Group continues to invest in its three divisions, with a
focus on the global energy and medical markets, to position them
for maximum shareholder value via eventual exits in the years to
come. The integration of Magnetica is proceeding to plan. The
previous acquisitions of Booth and Energy Steel are recovering
well, as demonstrated by the results in the period. The Peter
Brotherhood disposal has left the Group in a strong net cash
position, so we are proactively pursuing potential PIE prospects,
with the ability to capitalise on any suitable strategic
opportunities. Our value creation targets continue to be
accomplished as planned and are underpinned by a conservative
approach to debt.
The energy divisions have a strong emphasis on the thermal
power, nuclear and hydrocarbon markets and aftermarkets. Following
the acquisition of a majority stake in Magnetica in the period, the
medical division has pivoted to focus on compact, helium-free MRI
systems, which the Board believes could create significant future
shareholder value. To drive profitability and market engagement,
each division has a clear strategy to support end-user aftermarket
operations, servicing its own equipment and (where pertinent) third
parties, to capitalise on the continued market demand for
efficient, reliable and safe facilities.
The on-going disruption caused by the Covid-19 pandemic remains
our biggest uncertainty. However, we have taken rapid and effective
cost and risk mitigation actions so far, to limit any potential
downside and we will continue to be on our guard.
Despite the impacts of Covid-19, our markets continue to develop
and M&A opportunities remain a priority for us. Businesses like
ours can command high valuations at the point of exit, as
demonstrated by the disposal of Peter Brotherhood. 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, whether
deriving from Covid-19, or otherwise.
The Strategic Report was approved by the Board on 28 September
2021 and signed on its behalf by:
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
28 September 2021 28 September 2021 28 September 2021
CONSOLIDATED INCOME STATEMENT Note 2021 2020
GBP'000 GBP'000
Revenue 1 98,516 91,961
Cost of sales (68,586) (67,340)
--------- ---------
Gross profit 29,930 24,621
Distribution costs (3,024) (3,392)
Administrative expenses (20,821) (20,625)
--------- ---------
Operating profit before amortisation of acquired intangibles, other non-underlying items
and
exceptional items 8,188 3,249
Amortisation of acquired intangibles 2 (1,008) (2,004)
Share based payment 2 (133) (103)
Acquisition costs 2 (234) (294)
Restructuring costs (771) (244)
Other exceptional 43 -
--------- ---------
Operating profit 1 6,085 604
Finance income 2 73 38
Finance costs 2 (711) (711)
--------- ---------
Profit/(loss) before taxation 5,447 (69)
Taxation 3 (383) (28)
Profit/(loss) after taxation from continuing operations 2 5,064 (97)
========= =========
Profit after taxation from discontinued operations 6 22,136 1,483
Profit for the financial year 27,200 1,386
========= =========
Profit is attributable to:
Owners of Avingtrans PLC 27,366 1,386
Non-controlling interest (166) -
Total 27,200 1,386
========= =========
Earnings per share:
From continuing operations
- Basic 4 15.9p (0.3)p
-Diluted 4 15.6p (0.3)p
From continuing and discontinuing operations
-Basic 4 85.4p 4.4p
-Diluted 4 83.6p 4.3p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2021 2020
GBP'000 GBP'000
Profit for the year 27,200 1,386
Items that will not be subsequently be reclassified to profit or loss
Remeasurement of defined benefit liability (662) 58
Income tax relating to items not reclassified 49 (43)
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations (1,162) 120
Total comprehensive income for the year attributable to equity shareholders 25,425 1,521
======== ========
CONSOLIDATED BALANCE SHEET
at 31 May 2021 Note 2021 2020
GBP'000 GBP'000
Non current assets
Goodwill 21,222 23,459
Other intangible assets 14,464 13,834
Property, plant and equipment 25,281 34,445
Deferred tax 1,767 1,241
Pension and other employee obligations 1,284 1,646
---------- ----------
64,018 74,625
Current assets
Inventories 10,076 13,390
Trade and other receivables: falling due within one year 36,010 36,910
Trade and other receivables: falling due after one year 1,798 -
Current tax asset 633 1,221
Cash and cash equivalents 30,078 5,088
---------- ----------
78,595 56,609
Total assets 142,613 131,234
========== ==========
Current liabilities
Trade and other payables (26,587) (30,308)
Lease liabilities (1,310) (2,125)
Borrowings (2,160) (6,005)
Current tax liabilities (672) (70)
Provisions (1,742) (5,514)
Derivatives (144) (36)
Total current liabilities (32,615) (44,058)
========== ==========
Non-current liabilities
Borrowings (3,368) (3,965)
Lease liabilities (2,965) (9,340)
Deferred tax (3,456) (2,460)
Contingent consideration - (256)
Other creditors (1,246) (1,247)
---------- ----------
Total non-current liabilities (11,035) (17,268)
---------- ----------
Total liabilities (43,650) (61,326)
========== ==========
Net assets 98,963 69,908
========== ==========
Equity
Share capital 1,599 1,588
Share premium account 15,347 14,970
Capital redemption reserve 1,299 1,299
Translation reserve (732) 430
Merger reserve 28,949 28,949
Other reserves 1,457 180
Investment in own shares (4,235) (4,235)
Retained earnings 53,614 26,727
Total equity attributable to equity holders of the parent 97,298 69,908
========== ==========
Non-controlling interest 1,665 -
========== ==========
Total equity 98,963 69,908
========== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
at 31 May 2021
Capital Total
Share redemp- Trans- Invest-ment Attributable
Share premium tion Merger lation Other in own Retained owners of Non-controlling Total
capital account reserve reserve reserve reserves shares earnings the Group interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2019 1,568 14,018 1,299 28,949 310 180 (3,435) 26,405 69,294 - 69,294
Ordinary
shares issued 20 952 - - - - - - 972 - 972
Dividends paid - - - - - - - (1,191) (1,191) - (1,191)
Investment in
own shares - - - - - - (800) - (800) - (800)
Share-based
payments - - - - - - - 112 112 - 112
-------- ------- ------- ------- ------- -------- ------------ --------- ------------- ---------------- -------
Total
transactions
with owners 20 952 - - - - (800) (1,079) (907) - (907)
Profit for the
year - - - - - - - 1,386 1,386 - 1,386
Other
comprehensive
income
Actuarial gain
for the year
on pension
scheme - - - - - - - 58 58 - 58
Deferred tax
on actuarial
movement on
pension
scheme - - - - - - - (43) (43) - (43)
Exchange gain - - - - 120 - - - 120 - 120
-------- ------- ------- ------- ------- -------- ------------ --------- ------------- ---------------- -------
Total
comprehensive
income for
the year - - - - 120 - - 1,401 1,521 - 1,521
-------- ------- ------- ------- ------- -------- ------------ --------- ------------- ---------------- -------
Balance at
31 May 2020 1,588 14,970 1,299 28,949 430 180 (4,235) 26,727 69,908 - 69,908
======== ======= ======= ======= ======= ======== ============ ========= ============= ================ =======
Capital Total
Share redemp- Trans- Attributable Non-controlling
Share premium tion Merger lation Other Invest-ment Retained owners of the interest Total
capital account reserve reserve reserve reserves in own shares earnings Group Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2020 1,588 14,970 1,299 28,949 430 180 (4,235) 26,727 69,908 -, 69,908
Ordinary shares
issued 11 377 - - - - - - 388 - 388
Magnetica
acquisition - - - - - - - - - 1,831 1,831
Gain on disposal
of
non-controlling
interest in
subsidiary - - - - - 1,278 - - 1,278 - 1,278
Share-based
payments - - - - - - - 133 133 - 133
---------- --------- --------- --------- --------- ---------- -------------- ----------- --------------- ------------------- --------------------
Total transactions
with owners 11 377 - - - 1,278 - 133 1,799 1,831 3,630
Profit for the
year - - - - - - - 27,366 27,366 (166) 27,200
Other comprehensive
income
Actuarial gain for the
year on pension
scheme - - - - - - - (662) (662) - (662)
Deferred tax on
actuarial movement on
pension scheme - - - - - - - 49 49 - 49
Exchange loss - - - - (1,162) - - - (1,162) - (1,162)
------ ------- ----- ------ ------- ----- ------- --------- --------- ------ -------
Total comprehensive
income for the year - - - - (1,162) - 26,753 25,591 (166) 25,425
------ ------- ----- ------ ------- ----- ------- --------- --------- ------ -------
Balance at
31 May 2021 1,599 15,347 1,299 28,949 (732) 1,458 (4,235) 53,614 97,298 1,665 98,963
------ ------- ----- ------ ------- ----- ------- --------- --------- ------ -------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 May 2021 Note
2021 2020
GBP'000 GBP'000
Operating activities
Cash flows from operating activities 5 6,877 2,919
Finance costs paid (723) (1,189)
Income tax paid 491 (1,527)
Contributions to defined benefit plan (272) (254)
--------- -------
Net cash inflow/(outflow) from operating activities 6,373 (51)
--------- -------
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 6 341 720
Disposal of subsidiary undertaking, net of disposal costs 6 26,636 -
Finance income 73 38
Purchase of intangible assets (884) (760)
Purchase of property, plant and equipment (1,532) (3,984)
Proceeds from sale of property, plant and equipment - -
--------- -------
Net cash generated from/(used in) investing activities 24,634 (3,986)
Financing activities
Equity dividends paid - (1,191)
Repayments of bank loans (4,397) (675)
Repayment of leases (1,993) (2,200)
Proceeds from issue of ordinary shares 388 972
Proceeds from borrowings 149 3,807
--------- -------
Net cash (outflow)/inflow from financing activities (5,853) 713
Net increase/(decrease) in cash and cash equivalents 25,154 (3,324)
Cash and cash equivalents at beginning of year 4,693 8,053
Effect of foreign exchange rate changes on cash (111) (36)
--------- -------
Cash and cash equivalents at end of year 29,736 4,693
--------- -------
Avingtrans plc Notes
Preliminary Results for the year ended 31 May 20 21
1. Segmental analysis
Energy Energy Medical Unallocated
Year ended 31 May 2021 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 15,427 32,942 9,367 - 57,736
After Market 35,956 4,629 195 - 40,780
--------- ---------- --------- --------------- ----------
Revenue 51,383 37,571 9,562 - 98,516
========= ========== ========= =============== ==========
Operating profit/(loss) 2,833 4,312 (302) (758) 6,085
Net finance income/(expense) (390) (194) (45) (9) (638)
Taxation credit/(charge) 191 (651) 1 76 (383)
Profit/(loss) after tax from continuing operations 2,634 3,467 (346) (691) 5,064
========= ========== ========= =============== ==========
Segment non-current assets 44,164 11,525 8,329 - 64,018
Segment current assets 34,940 15,045 3,711 24,899 78,595
--------- ---------- --------- --------------- ----------
79,104 26,570 12,040 24,899 142,613
Segment liabilities (9,381) (12,856) (6,331) (15,082) (43,650)
--------- ---------- --------- --------------- ----------
Net assets 69,723 13,714 5,709 9,817 98,963
========= ========== ========= =============== ==========
Non-current asset additions
Intangible assets 75 318 3,610 - 4,003
Tangible assets 1,544 663 105 - 2,312
--------- ---------- --------- --------------- ----------
1,619 981 3,715 - 6,315
========= ========== ========= =============== ==========
Other income statement items:
========= ========== ========= =============== ==========
Depreciation and amortisation (2,409) (1,119) (788) - (4,316)
========= ========== ========= =============== ==========
Unallocated assets/ (liabilities) consist primarily of
interest-bearing assets and liabilities and income tax assets and
liabilities. Medical MII results include the acquisition of
Magnetica AU which contributed GBP47k Group revenue and GBP418k
loss after tax respectively (note 6).
Energy Energy Medical Unallocated
Year ended 31 May 2020 EPM PSRE MII central items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Original Equipment 12,780 28,032 11,879 - 52,691
After Market 36,530 2,740 - - 39,270
--------- ---------- --------- --------------- ----------
Revenue 49,310 30,772 11,879 - 91,961
========= ========== ========= =============== ==========
Operating profit/(loss) 1,261 366 (326) (697) 604
Net finance (expense)/ income (549) (51) (62) (11) (673)
Taxation (84) (124) 121 59 (28)
Profit/ (loss) after tax from continuing operations 628 191 (267) (649) (97)
========= ========== ========= =============== ==========
Segment non-current assets 46,933 22,978 4,714 - 74,625
Segment current assets 25,072 23,613 3,169 4,755 56,609
--------- ---------- --------- --------------- ----------
72,005 46,591 7,883 4,755 131,234
Segment liabilities (3,845) (29,875) (9,627) (17,979) (61,326)
--------- ---------- --------- --------------- ----------
Net assets 68,160 16,716 (1,744) (13,224) 69,908
========= ========== ========= =============== ==========
Non-current asset additions
Intangible assets 1,697 336 118 - 2,151
Tangible assets 1,574 2,292 118 - 3,984
--------- ---------- --------- --------------- ----------
3,271 2,628 236 6,135
========= ========== ========= =============== ==========
Other income statement items:
========= ========== ========= =============== ==========
Depreciation and amortisation (2,401) (604) (747) - (3,752)
========= ========== ========= =============== ==========
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:
2021 2020 2021 2020
Non-current Non-current
Revenue Revenue Assets Assets
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 43,594 39,816 27,485 39,704
Europe (excl. UK) 8,407 9,808 - -
United States of America 18,619 20,532 27,544 29,587
Africa & Middle East 2,137 2,482 - -
Americas & Caribbean (excl. USA) 3,523 4,155 - -
China 11,137 8,325 2,059 2,396
Asia Pacific (excl. China) 10,606 6,843 3,879 51
Antarctica 493 - - -
98,516 91,961 60,967 71,738
========= ======== =========== ===========
The Group had no single external customer which represented more
than 10% of the Group's revenue in the current or prior year
Prior year figures have been restated throughout the notes due
to PB moving to discontinued operation.
2. Adjusted Earnings before interest, tax, depreciation and
amortisation
2021 2020
GBP'000 GBP'000
Profit/(loss) before tax from continuing operations 5,447 (69)
Share based payment expense 133 103
Acquisition costs 234 294
Restructuring costs 771 244
Other exceptionals (43) -
Loss on derivatives 109 8
Amortisation of intangibles from business combinations 1,008 2,004
------- -------
Adjusted profit before tax from continuing operations 7,659 2,584
Finance income (73) (38)
Finance cost 711 711
Loss on derivatives (109) (8)
------- -------
Adjusted profit before interest, tax and amortisation from business combinations ('EBITA') 8,188 3,249
Depreciation 3,461 3,352
Amortisation of other intangible assets 545 403
Amortisation of contract assets 310 -
Adjusted Earnings before interest, tax, depreciation and amortisation ('EBITDA') from continuing
operations 12,504 7,004
======= =======
The Directors believe that the above adjusted earnings are a
more appropriate reflection of the Group performance.
3. Taxation
2021 2020
GBP'000 GBP'000
Continuing operations
Current tax
Corporation tax - current year 6 57
Corporation tax - prior year 43 13
Overseas tax 738 (170)
-------- --------
Total current tax 787 (100)
Deferred tax
Deferred tax - current year (241) 111
Deferred tax - prior year (298) (50)
Deferred tax - rate 135 67
Total deferred tax (404) 128
Tax charge on continuing operations 383 28
======== ========
Tax (credit)/charge on discontinued operations (746) 406
======== ========
Total tax (credit)/charge in the year (363) 434
======== ========
C orporation tax is calculated at 19% (20 20 : 19 %) of the
estimated assessable profit /loss for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
4. Earnings per ordinary share
Basic and diluted earnings per share have been calculated in
accordance with IAS 33 which requires that earnings should be based
on the net profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares in issue during the
year.
For diluted earnings per share the weighted average number of
ordinary shares is adjusted to assume conversion of all dilutive
potential ordinary shares, being the CSOP and ExSOP share
options.
2021 2020
Number Number
Weighted average number of shares - basic 31,855,908 31,531,278
Share option adjustment 670,102 569,687
Weighted average number of shares - diluted 32,526,010 32,100,965
========== ==========
2021 2020
GBP'000 GBP'000
Profit from continuing operations 5,064 (96)
Share based payment expense 133 103
Acquisition costs 234 294
Restructuring costs 771 244
Other exceptionals (43) -
Loss on derivatives 109 8
Amortisation of intangibles from business combinations 1,008 2,004
Adjusted profit after tax from continuing operations 7,276 2,557
========== ==========
From continuing operations:
Basic earnings per share 15.9p (0.3)p
Adjusted basic earnings per share 22.8p 8.1p
Diluted earnings per share 15.6p (0.3)p
Adjusted diluted earnings per share 22.4p 8.0p
Earnings from discontinuing operations: 24,028 2,642
From discontinuing operations
Basic earnings per share 69.5p 4.7p
Adjusted basic earnings per share 75.4p 8.4p
Diluted earnings per share 68.1p 4.6p
Adjusted diluted earnings per share 73.9p 8.2p
Earnings attributable to shareholders including non-controlling interest 31,303 5,199
Basic earnings per share 85.4p 4.4p
Adjusted basic earnings per share 98.3p 16.5p
Diluted earnings per share 83.6p 4.3p
Adjusted diluted earnings per share 96.2p 16.2p
The Directors believe that the above adjusted earnings per share
calculation for continuing operations is a more appropriate
reflection of the Group's underlying performance.
There are Nil share options at 31 May 2021 (2020: 585,000) that
are not included within diluted earnings per share because they are
anti-dilutive .
5. Notes to the consolidated cash flow statement
Cash flows from operating activities:
2021 2020
GBP'000 GBP'000
Continuing operations
Profit/(loss) before income tax from continuing operations 5,447 (69)
(Loss)/profit before income tax from discontinuing operations before disposal (1,732) 1,889
Adjustments for:
Depreciation 3,461 4,343
Amortisation of intangible assets 545 466
Amortisation of intangibles from business combinations 1,008 2,222
Loss on disposal of property, plant and equipment 6 119
Finance income (73) (38)
Finance expenses 711 1,141
Share based payment charge 133 112
Changes in working capital
Decrease in inventories 1,468 2,157
Increase in trade and other receivables (5,108) (5,010)
Increase/(decrease) in trade and other payables 1,457 (3,565)
Decrease in provisions (457) (824)
Other non cash changes 11 (24)
Cash flows from operating activities 6,877 2,919
========= =========
2021 2020
GBP'000 GBP'000
Cash and cash equivalents
Cash 30,078 5,088
Overdrafts (342) (395)
29,736 4,693
========= =========
6. Acquisitions and disposals
Business combination - Magnetica Limited
On 29 January 2021, the Group acquired 58.1% of the shares in
Magnetica Ltd in exchange for its 98.5% shareholding in Scientific
Magnetics Limited plus deferred cash consideration. Prior to
exchange Avingtrans capitalised its GBP4,097,000 loan to Scientific
Magnetics Limited for an increase in its shareholding to 98.5%.
Post-acquisition Scientific Magnetics Limited will be a subsidiary
of the Magnetica Limited.
Magnetica Limited is an Australian medtech and engineering
company which specialises in next-generation MRI technologies. By
bringing together Scientific Magnetics Limited and Magnetica
Limited management can accelerate the development of compact MRI
systems.
Scientific Magnetics Limited owns 100% of the common stock of
Tecmag Inc, a subsidiary based in Texas which specialises in
spectrometer design and manufacture.
The fair value of Magnetica's net assets at the date of
acquisition were as follows:
GBP'000
Property, plant and equipment 306
Intangible assets 3,119
Inventories 42
Trade and other receivables 23
Cash 349
Trade and other payables (197)
Deferred tax liability (858)
Net assets 2,784
Goodwill 324
3,108
========
Goodwill and consideration on acquisition:
Fair value of business given in consideration 1,785
Deferred consideration 156
Non-controlling interest in relation to Magnetica 1,167
Less fair value of assets and liabilities acquired (2,784)
--------
Goodwill 324
--------
We have calculated the fair value of the business given in
consideration using a discounted cash flow model. In exchange for
the 58.1% shareholding in Magnetica the gave up 40.4% of our
interest in Scientific Magnetics and its subsidiary, Tecmag. The
40.4% is the difference between the original ownership in
Scientific Magnetics (98.5%) and the acquired shareholding in
Magnetica (58.1%). To calculate the value Scientific Magnetics and
Tecmag, have prepared detailed cash flow forecasts on a standalone
basis for a 2-year period beyond the acquisition date. Beyond the
forecast period we have assumed a 3.4% revenue growth rate based on
historical trends. Cash flows have been discounted at a rate of
13.7%
As part of the sales agreement, Avingtrans were required to make
an additional cash injection of GBP388,000. The deferred
consideration value is calculated by multiplying this cash
injection by 40.4%. The deferred cash consideration was paid in the
financial year.
Non-controlling interest has been calculated using the
proportionate share of net assets approach.
The impact of the Magnetica acquisition on the Consolidated
income statement is as follows:
GBP'000
Revenue 47
Cost of sales (22)
--------
Gross profit 25
Distribution costs (209)
--------
Operating profit before amortisation of acquired intangibles,
other non-underlying items and other exceptional items
other non-underlying items and exceptional items (184)
Acquisition related expenses (234)
Loss before tax (418)
Tax income -
--------
Overall effect on the Consolidated Income Statement (418)
========
Since acquisition Magnetica contributed the following to the
Group's cashflows:
GBP'000
Net cash outflow from operating activities (398)
Net cash used by investing activities (173)
Net cash inflow from financing activities -
Discontinued operations - Peter Brotherhood Limited
a) Description
On 11 March 2021, Hayward Tyler Group PLC, subsidiary of the
Avingtrans Group disposed of Peter Brotherhood Limited to Granite
Holdings Global Limited. Peter Brotherhood Limited is reported as a
discontinued operation. Financial information relating to the
discontinued operation for the period to the date of disposal is
set out below.
In the prior year, management took the decision to close the
Crown site near Bristol and relocate the residual road and rail
infrastructure assets to Stainless Metalcraft. The financial
results for this year are included in the table below.
b) Financial performance and cash flow information
2021 2020
GBP'000 GBP'000
Revenue 8,354 22,697
Expenses (10,086) (20,808)
--------- ---------
(Loss)/profit before income tax (1,732) 1,889
Income tax credit/(expense) 489 (406)
--------- ---------
(Loss)/profit after income tax of
discontinued operations (1,243) 1,483
Gain on sale of the subsidiary after 23,379 -
income tax
--------- ---------
Profit from discontinued operations 22,136 1,483
========= =========
2021 2020
GBP'000 GBP'000
Net cash flow from operations (2,314) 2,624
Net cash flow from investing activities 26,618 (595)
Net cash flow from financing activities (383) (4,472)
--------- ---------
Net increase/(decrease) in cash
generated 23,921 (2,443)
========= =========
c) Details of the sale of the subsidiary
2021
GBP'000
Cash consideration 30,636
Adjustment for cash on disposal (1,573)
Disposal expenses (2,428)
--------
Net cash impact from disposal 26,635
========
d) Profit on the sale of the subsidiary
2021
GBP'000
Net cash impact from disposal 26,636
Adjustment for cash on disposal 1,573
Net assets (4,830)
Profit on disposal of subsidiary 23,379
================
The carrying amount of assets and liabilities at the date of
sale were:
2021
GBP'000
Goodwill 2,521
Other intangible assets 1,464
Property, plant & equipment 6,610
Deferred tax asset 617
Inventories 1,285
Trade and other receivables 3,026
Current tax assets 248
Cash and cash equivalents 1,573
---------
Total assets 17,344
---------
Trade and other payables (4,169)
Deferred tax liability (257)
Lease liabilities (5,536)
Provisions (2,552)
---------
Total liabilities (12,514)
---------
Net assets 4,830
---------
e) Reconciliation of enterprise value to equity value (cash consideration)
The disposal was made using a locked box mechanism which fixes
the price payable on completion by reference to the net debt and
working capital on an agreed point in time (the "locked box
date").
GBP'000
Enterprise value 35,000
Normalised working capital (1,043)
Cash 1,877
Lease liabilities (5,649)
Deferred capital expenditure (446)
Other items 897
--------
Equity value / cash consideration 30,636
========
7. Net cash/ (debt) and gearing
2021 2020
GBP'000 GBP'000
Cash 30,078 5,088
Overdrafts (342) (395)
Loans (5,186) (9,575)
Lease liability - finance leases under IAS17 (1,210) (2,503)
-------- ---------
Net cash/(debt) - excluding IFRS 16 23,340 (7,385)
Lease liability - under IFRS 16 (3,065) (8,962)
Net cash/(debt) 20,275 (16,347)
======== =========
Equity 98,963 69,907
======== =========
Net cash/(debt) to equity ratio 20.5% (23.4)%
======== =========
8. Preliminary statement and basis of preparation
This preliminary statement, which has been agreed with the
auditors, was approved by the Board on 28 September 2021. 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 2021 and
2020 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 2020 have been
delivered to the Registrar of Companies but the 31 May 2021
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, are set out in the
statutory financial statements for the year ended 31 May 2021.
9. Annual report and Accounts
The Report and Accounts for the year ended 31 May 2021 will be
available on the Group's website www.avingtrans.plc.uk on or around
11 October 2021. 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 18 November 2021 at 11:00am.
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END
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