Final Results
Embargoed Release: 07:00hrs Wednesday 10th September 2008
Avingtrans plc
("Avingtrans" or the "Group")
Final Results for the Year Ended 31 May 2008
Avingtrans plc (AIM:AVG), the designer, manufacturer and supplier of critical
components and associated services to the medical, energy, industrial and
global aerospace sectors is pleased to announce its Final Results for the Year
ended 31 May 2008.
Highlights
* Turnover up to £41.2m (2007: £40.0m)
* Profit before tax and intangible amortisation £1.8m (2007: £3.2m)
* EBITA £2.7m (2007: £3.9m)
* Adjusted diluted earnings per share of 7.4p (2007: 18.5p)
* Gearing of net debt to net assets at 31 May 2008 was 66.8% (2007: 70.8%)
* Proposed final dividend of 0.75p per share (2007: 0.75p) totalling 1.25p
(2007: 1.25p) for the year
Operating highlights
* Steve McQuillan recruited as CEO - Steve joins us from a senior position in
Serco plc, his appointment underpins our confidence in the outlook for
Avingtrans.
* B&D returned to profitability and signed an important long term agreement
with its major client, Rolls Royce Group Plc.
* Sigma began volume production in Chengdu, China and is rapidly moving
toward break even.
* Metalcraft is successfully transitioning to become an energy led business
and has won orders worth over £4m from this sector. We have also
established a pipeline of opportunities including a joint venture style
agreement to manufacture in China.
Roger McDowell, Chairman, commented:
"We have a highly focused and dedicated team at Avingtrans, and over the past
six months we have developed a clear strategy to deliver much improved returns
for shareholders. The cornerstone of this strategy is having the ability to
develop and deliver the highest quality products through our engineering
expertise, in depth market knowledge, outstanding customer service and unique
low cost manufacturing base in China. All this has to be backed-up by good
people and strong senior management with the know how to deliver our commercial
goals. I now believe that everything is in place and I look forward with
confidence to the future growth of Avingtrans plc."
Contacts:
Avingtrans plc
Tel. 01159 499 020
Roger McDowell, Chairman
Stephen King, Finance Director
KBC Peel Hunt Ltd
Tel. 020 7418 8900
Julian Blunt
David Anderson
Hansard Group
Tel. 020 7245 1100
Adam Reynolds
2008 Preliminary statement
Chairman's statement
2008 proved to be a challenging year for Avingtrans. The Group's financial
performance, although meeting revised expectations, was, in overall terms,
unacceptable. I joined the Board on 22 February 2008 and was appointed Chairman
and acting CEO on 10 March 2008 and have now conducted a thorough review of the
business.
Notwithstanding the disappointing results, the Group has emerged strengthened
and with a pipeline of significant opportunities in robust and attractive
markets.
Highlights
* Steve McQuillan recruited as CEO - Steve joins us from a senior position in
Serco plc, his appointment underpins our confidence in the outlook for
Avingtrans.
* B&D returned to profitability and signed an important long term agreement
with its major client.
* Sigma began volume production in Chengdu, China and is rapidly moving
toward break even.
* Metalcraft is successfully transitioning to become an energy led business
and has won orders worth over £4m from this sector. We have also
established a pipeline of opportunities including a joint venture style
agreement to manufacture in China.
* Jena group businesses enjoyed a record year and have strong forward order
books.
The team at Avingtrans are focused on improving returns for shareholders. We
recognise that this will only be achieved by adopting a clear strategy and then
successfully executing it. Central to our approach is an ethos of outstanding
customer service backed up by good people, highest quality products, in depth
knowledge of our markets and strong engineering know-how. If we remain focussed
the Group can look forward to strong value growth for years to come.
Financial performance
EBITDA was £4.1m (2007: £5.0m) on improved turnover of £41.2m (2007: £40.0m).
Operating profit before the amortisation of intangible assets was £2.7m (2007:
£4.0m). Profit before tax (after adding back intangible amortisation and
impairment) was £1.8m (2007: £3.2m). Profit after tax was £1.1m (2007: £0.2m),
representing a 7.1% return on net assets.
Net interest of £0.9m (2007: £0.7m) was incurred in the year, resulting from a
full year of debt and increased working capital following the B&D acquisition
and the changing business of some of the key subsidiaries.
The effective rate of tax was 32.4% (2007: 30.6%) compared with a standard rate
of tax of 30%. The difference between the actual and standard rate is primarily
due to the losses in China not being available for offset in the year.
Basic earnings per share before goodwill amortisation was 6.5p (2007: 0.9p).
Adjusted diluted earnings per share before goodwill amortisation was 7.4p
(2007: 18.5p).
Cash flow from operating activities for the year was £2.8m (2007: £3.5m). The
net debt at the year-end was £10.8m (2007: £10.5m) resulting in a gearing of
66.8% (2007: 70.8%) on net assets of £16.2m (2007: £14.9m).
During the year capital projects totalling £0.6m (2007: £1.3m) were implemented
across the Group and £0.4m (2007: £0.3m) was spent on development costs related
to the future introduction of new products.
Divisional performance
Energy and Medical Division
Stainless Metalcraft
Medical
Against challenging conditions in its medical related markets, Metalcraft was
able to maintain margins, mitigating the impact of a slowdown in sales. It was
anticipated that a change in supply chain thinking on behalf of its principal
customer, Siemens Magnet Technology (SMT), would reduce demand for its large
medical components. This impact did not take place until later in the year, but
was then exacerbated by a downturn in world demand for NMR and MRI equipment.
This was reflected in lower than expected requirements from SMT and other
customers. However, we have recently signed a new agreement with SMT securing
future business, albeit at lower than previous volumes.
Energy
The oil price and green agenda has opened up excellent energy related
opportunities for large specialised pressure equipment. Metalcraft has always
maintained a presence in these markets and has the know-how and specialised
plant to enable it to compete very successfully.
Exploration equipment, particularly FPSO's (Floating Production Systems) show
strong growth and Metalcraft has already secured £4 million of orders for 1st
and 2nd stage separation equipment.
Alternative energy is another area of business which Metalcraft expects to
exploit in the coming years. Again, fossil fuel energy costs have sparked high
levels of activity in this field. Metalcraft secured an early supply agreement
for large Fuel Cell components for which it delivered prototypes. Further
orders have been secured for the current year for test and pre-production
systems. Metalcraft's long association with the nuclear reprocessing industry
shows signs of significant potential, both in decommissioning and new builds.
The Diving and Diving Support markets offer important potential in the energy
sector. During the year Metalcraft delivered two pressure hulls for rescue
craft for both the Korean and Singaporean Navies, as well as equipment for
commercial diving operations. At present the order book for the current year is
strong with over £1 million of orders already underway, mainly for diving bells
and deck reception systems.
Other
Science and Research activity was lower than expected, but opportunities for
Astronomy coating plants will provide significant business in the coming years.
China
Sales in China have not been realised in 2008 so far, but expectations are high
for 2009, having signed an important joint venture style agreement which gives
us immediate access to production facilities and a key client relationship.
The model of design, engineering, proof of concept and prototyping in the UK
and then bulk manufacture in China is exciting many of our existing clients and
we now have a number of important potential orders. We anticipate that this
model will enable us to drive strong growth in the years to come in both the
Metalcraft and Sigma businesses.
Crown
On a similar level of sales as the previous years, Crown managed to improve its
return on sales year on year. Crown has now fully developed the new `smart pole
'which has been positively received by the market and is undergoing Home Office
approval for several key customers. Additional opportunities are being pursued
in the wider `intelligent' road signage market. For the first time, a
significant proportion of Crown's sales came from overseas markets (over 23%).
Aerospace
Sigma
Sigma, our start up manufacturing facility in China, has now started volume
production, but made no material contribution to sales in the year. The
establishment of Sigma has taken longer than planned and the learning curve has
been steep. However, this experience will stand us in good stead in the future.
We believe that our early position gives us significant competitive advantage
and a solid platform for growth. We have a strong pipeline of multi £m
opportunities with `blue chip` aerospace companies. It is critical that we
exploit our position: this requires us to further invest, whilst seeking
aggressive growth.
B&D Patterns
B&D has stabilised the business with its major client with whom it has now
announced an important long term agreement - an important advance on the
position last year. The business is now trading profitably and we have improved
both controls and management information. A proportion of its production can be
migrated to Sigma, improving margins and allowing consolidation of two units
and releasing for sale a factory in Hinckley. We are continuing to vigorously
pursue an action, under warranties, against the vendors of the B&D business and
are advised that we have a strong case.
C&H Precision
C&H continues to be a strong contributor, but finished the year slightly softer
due to supply chain issues with a key customer. C&H continues to be service led
and is actively considering adding new processes to widen its offering. It has
recently opened a new facility in Cheltenham in response to strong demand from
customers in this area.
Industrial Products
The Jena Tec division had an outstanding year seeing strong demand for its
precision machine tool components as requirements grow worldwide for machine
tool systems in diverse fields ranging from medical and automotive through to
aerospace and power generation. Sales revenues increased within the year by
over 15% in each operating subsidiary compared to previous financial periods,
with exceptional demand within the strong German manufacturing economy.
To secure this strong position, the Board has approved significant investment
at Jena Tec in new high speed machining technology to consolidate its position
as a precision manufacturer and to match capacity demands. With significant
ongoing development of new linear and rotary products being launched to market,
Jena Tec expects to continue to aggressively grow its international penetration
within emerging markets, USA and Europe in years to come.
Jena Tec enjoys a niche position in markets that have been very buoyant and we
must be aware of the natural business cycle in its core business.
Strategy
In conjunction with the Board (and with the close involvement of Steve
McQuillan) I have examined the strategic opportunities for the Group. We have
decided to continue to build on those businesses where we have both growing
markets and competitive advantage.
In both our Aerospace and Energy related activities the model of combining the
best of UK based know how with a China based volume manufacturing has strong
appeal to key customers.
We will continue to closely monitor the performance of each of our divisions,
whilst seeking complimentary acquisitions, particularly in the Aerospace and
Energy fields, enabling us to further exploit our existing capabilities.
Board
I would like to record my thanks to Ken Baker who retired during the year. Ken
made a major contribution to development of Avingtrans. Steve Lawrence also
stepped down - his operational skills and experience will be missed. Steve
merits the thanks and best wishes of the Board for the future. Stephen Bruh, a
long serving non-executive, left to pursue his personal business interests and
we wish him well.
I am delighted to welcome Steve McQuillan as CEO. Steve joins us from Serco plc
where he was a divisional managing director. Steve brings a wealth of
experience, a high level of energy and clearly held views as to the future
direction of the Group. I know he is determined to make his mark and I look
forward to working closely with him.
Peter Kenny, managing director of the Energy and Medical division, joined the
Group Board in April 2008. Peter brings important operational know-how to
enrich the Board debate and I am pleased to welcome him.
We are seeking an additional strong non-executive to compliment the Board. We
will then have a fully refreshed team, capable of leading the Group to a return
to strong growth and continued success.
In accordance with the Articles of Association, Stephen King retires from the
Board by rotation and Steve McQuillan, Peter Kenny and myself offer themselves
for re-election at the AGM scheduled for 16 October 2008.
Dividend
The Directors are recommending to the shareholders at the AGM a final dividend
of 0.75p per share making a total of 1.25p for the year (2007: 1.25p). This
will be paid on 24 November 2008 to shareholders on the register at 10 October
2008.
Outlook
The principal markets we serve continue to be robust in the face of difficult
global economic conditions.
A substantial element of the expected turnover for 2009 is underpinned by our
order book. However, to achieve or outstrip the demanding targets we have set
ourselves, we need to win certain new business (and have clear visibility of
these potential orders). Subject to our continued success in closing this work
and timing considerations, we look forward to a substantially improved
performance.
Our success depends upon the continuing dedication, skill and endeavour of all
our people. I would like to thank them personally for their hard work and
continuing commitment.
R S McDowell
Chairman
10 September 2008
Consolidated Income Statement
for the year ended 31 May 2008
Note Year to Year to
31 May 31 May
2008 2007
£'000 £'000
Revenue 41,247 40,026
Cost of sales (30,324) (29,806)
Gross profit 10,923 10,220
Distribution costs (944) (885)
Administrative expenses (7,249) (5,397)
Operating profit before share based 2,730 3,938
payments and amortisation / impairment of
intangibles
Share based payment expense (25) (67)
Amortisation of intangibles from business (137) (322)
combinations
Impairment of intangibles from business - (2,655)
combinations
Operating profit 2,568 894
Finance income 6 16
Finance costs (880) (681)
Profit before taxation 1,694 229
Taxation (549) (70)
Profit for the financial year 1,145 159
Earnings per share :
From continuing operations
- Basic 6.5p 0.9p
- diluted 6.4p 0.9p
All the above results are from continuing operations
Consolidated statement of total recognised income and expense
for the year ended 31 May 2008
Note Year to Year to
31 May 31 May
2008 2007
£'000 £'000
Exchange differences on translation of 335 (37)
foreign operations
Net movement recognised directly in equity 335 (37)
Profit for the year 1,145 159
Total recognised income and expense for the 1,480 122
year
Consolidated cash flow statement
for the year ended 31 May 2008
Note Year to Year to
31 May 2008 31 May 2007
£'000 £'000
Operating activities
Cash flows from operating activities 2,819 3,528
Finance costs paid (902) (685)
Income tax paid (757) (356)
Net cash inflow from operating activities 1,160 2,487
Investing activities
Interest received 6 16
Acquisition of subsidiaries (16) (8,185)
Acquisition of investment (219) -
Purchase of intangible assets (411) (279)
Purchase of property, plant and equipment (607) (1,298)
Proceeds from sale of property, plant and 53 128
equipment
Proceeds from sale of investments 19 -
Net cash used in investing activities (1,175) (9,618)
Financing activities
Dividends paid (220) (165)
Repayments of borrowings (1,044) (964)
Repayments of obligations under finance (873) (925)
leases
Proceeds from issue of ordinary shares 34 2,023
Borrowings raised 869 4,641
Net cash from financing activities (1,234) 4,610
Net decrease in cash and cash equivalents (1,249) (2,519)
Cash and cash equivalents at beginning of (1,302) 1,224
period
Effect of foreign exchange rate changes 17 (7)
Cash and cash equivalents at end of year (2,534) (1,302)
Cash generated from operations:
for the year ended 31 May 2008
Year to Year to
31 May 31 May
2008 2007
£000 £000
Continuing operations
Profit before income tax 1,694 229
Adjustments for:
Depreciation 1,287 1,146
Amortisation and impairment of Intangible 227 2,999
assets
(Profit) on disposal of property, plant (20) (121)
and equipment
(Profit) on disposal /impairment of (7) 3
investment
Finance income (6) (16)
Finance expense 880 681
Share based payment charge 25 67
Changes in working capital
(Increase) in inventories (327) (1,529)
Decrease/(increase) in trade and other 1,660 (1,465)
receivables
(Decrease)/increase in trade and other (2,619) 1,500
payables
Other non cash charges 25 34
Cashflows from operating activities 2,819 3,528
Summarised consolidated balance sheet
at 31 May 2008
Note 2008 2007
£'000 £'000
Non current assets
Goodwill 10,242 10,226
Other intangible assets 1,784 1,600
Property, plant and equipment 10,560 11,090
Deferred tax 24 333
Investments 219 12
22,829 23,261
Current assets
Inventories 6,480 5,968
Trade and other receivables 6,984 8,585
Current tax asset 196 110
Cash and cash equivalents 548 1,216
14,208 15,879
Total assets 37,037 39,140
Current liabilities
Trade and other payables (7,278) (9,909)
Obligations under finance leases (935) (798)
Borrowings (3,591) (3,750)
Current tax liabilities (489) (783)
Total current liabilities (12,293) (15,240)
Non-current liabilities
Borrowings (5,034) (5,330)
Obligations under finance leases (1,789) (1,844)
Deferred tax (1,003) (1,127)
Deferred consideration (750) (750)
Total non-current liabilities (8,576) (9,051)
Total liabilities (20,869) (24,291)
Net assets 16,168 14,849
Equity
Share capital 882 879
Share premium account 6,272 6,241
Capital redemption reserve 814 814
Merger reserve 402 402
Translation reserve 298 (37)
Other reserves 180 180
Retained earnings 7,320 6,370
Total equity attributable to equity 16,168 14,849
holders of the parent
Notes to the preliminary statement
31 May 2008
1. Segmental analysis
Year ended 31 May 2008 Aerospace Medical and Industrial Unallocated Total
Research Products Central
items
£'000 £'000 £'000 £'000 £'000
Revenue 12,333 20,863 8,051 - 41,247
Operating profit 484 1,492 808 (216) 2,568
Net finance costs (874)
Taxation (549)
Profit after tax 1,145
Segment assets 14,540 15,407 6,746 344 37,037
Segment liabilities (6,355) (6,415) (2,428) (5,671) (20,869)
Net assets/ 8,185 8,992 4,318 (5,327) 16,168
(liabilities)
Capital expenditure 411 391 216 - 1,018
Depreciation and 712 532 270 - 1,514
amortisation
Year ended 31 May 2007 Aerospace Medical and Industrial Unallocated Total
Research Products Central
items
£'000 £'000 £'000 £'000 £'000
Revenue 10,305 22,985 6,736 - 40,026
Operating profit/(loss) (1,705) 2,261 570 (232) 894
Net finance costs (665)
Taxation (70)
Profit after tax 159
Segment assets 15,138 17,654 6,053 295 39,140
Segment liabilities (8,170) (7,448) (1,932) (6,741) (24,291)
Net assets/ 6,968 10,206 4,121 (6,446) 14,849
(liabilities)
Capital expenditure 1,016 568 556 - 2,140
Depreciation and 702 524 264 - 1,498
amortisation
Geographical segment
2008 2007 2008 2007 2008 2007
Revenue Revenue Net Net Capital Capital
assets assets expenditure expenditure
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 31,075 31,470 11,895 10,281 647 913
Europe 7,954 6,681 4,908 4,734 159 504
North America 2,607 2,543 (383) (386) 1 4
Rest of the World 810 208 (252) 220 211 719
Eliminations (1,199) (876) - - - -
41,247 40,026 16,168 14,849 1,018 2,140
2. Taxation
2008 2007
£'000 £'000
Current tax 563 691
Deferred tax (14) (621)
549 70
3. Earnings per share
2008 2007
No No
Weighted average number of shares - basic 17,604,810 16,805,321
Warrant/ Share Option adjustment 174,615 545,151
Weighted average number of shares - diluted 17,779,425 17,350,472
£'000 £'000
Earnings attributable to shareholders 1,145 159
Adjusted earnings attributable to 1,307 3,203
shareholders
Basic earnings per share 6.5p 0.9p
Adjusted basic earnings per share 7.4p 19.1p
Diluted earnings per share 6.4p 0.9p
Adjusted diluted earnings per share 7.4p 18.5p
4. Preliminary statement
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 10 September 2008. It is not the Company's statutory
accounts. Statutory accounts will be sent to shareholders shortly.
The statutory accounts for the two years ended 31 May 2007 and 2006 received
audit reports which were unqualified and did not contain statements under s237
(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended
31 May 2007 have been delivered to the Registrar of Companies but the 31 May
2008 accounts have not yet been filed.
5. Annual report and Accounts
The Report and Accounts for the year ended 31 May 2008 will be posted to
shareholders on or around 23 September 2008. Further copies will be available
from the Company's Registered Office:
Precision House, Derby Road, Sandiacre, Nottingham, NG10 5HU
Copies will also available on the Group's website www.avingtrans.plc.uk
6. Annual General Meeting
The Annual General Meeting of the Group will be held at The Holiday Inn,
Bostocks Lane, Sandiacre, Nottingham NG10 5NL at 10.00 a.m. on 16 October 2008.
Friday, 17th May 2024
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