Last checked at 9 Sep 2009 07:00
Wednesday 9 September 2009 Avingtrans plc ("Avingtrans" or the "Group") Final Results for the Year Ended 31 May 2009
Avingtrans plc (AIM:AVG), which designs, manufactures and supplies critical components and associated services to the energy, medical, industrial and global aerospace sectors, today announces its results for the twelve months ended 31 May 2009.
Financial Highlights
* Turnover decreased by 8.9% to 37.6m (2008: 41.2m) * Gross profit margin increased to 27.0% (2008: 26.5%) * PBT1 increased to 2.0m (2008: 1.8m)
* Fully diluted, adjusted2 EPS of 6.2 pence per share (2008: 7.4 pence per share)
* Continued new investment of 2.4m in the business during the period
* Gearing reduced to 48.2% (2008: 66.8%)
1 - profit before tax adjusted to add back amortisation
2 - fully diluted earnings per share adjusted to add back amortisation and exceptional items
Operating highlights
* New long term agreement signed with biggest Aerospace customer * Warranty claim settled3 with former owners of B&D Patterns for 1.25m
* Major 4m Oil & Gas project successfully completed - further prospects in sight
* Metalcraft signed Letter of Intent with Cummins for supply of generator frames
* Contract extension signed with Siemens Healthcare for MRI equipment
* Jena-Tec won first major order from China - Asian market developing well
3 - post 31 May 2009
Commenting on the results, Roger McDowell, Chairman, said:
"It has been a very challenging 12 months for Avingtrans. Our performance was,nonetheless, resilient in turbulent conditions, due to the inherent strength inthe core businesses and the actions taken by management to stabilise the Group.I'm pleased, therefore, to report a performance in line with marketexpectations. However, we expect that trading conditions will remain tough forthe foreseeable future, so steady progress is our aim over the next year."
Contacts:Avingtrans plc Tel. 01159 499 020 Steve McQuillan, CEO
Stephen King, Finance Director
KBC Peel Hunt Ltd Tel. 020 7418 8900 Richard Kauffer, Corporate Finance
Matthew Tyler, Corporate Broking
Hansard Group Tel. 020 7245 1100 Adam Reynolds John Bick
About Avingtrans (www.avingtrans.plc.uk)
Avingtrans plc is engaged in the provision of highly engineered components andservices to the energy, medical, scientific and research communities, trafficmanagement, automation, machinery and aerospace industries worldwide. Organizedin three business segments:
Aerospace, engaged in the manufacture of rigid pipe assemblies and prismatic components for aero engines and precision finishing of aircraft components;
Energy and Medical, engaged in the manufacture of machined and fabricated pressure and vacuum vessels and components for the energy, medical, science and research communities and design and manufacture of fabricated poles and cabinets for roadside safety cameras and rail track signalling; and
Industrial products, engaged in the design, manufacture, distribution and service of precision ballscrews, spindles and related linear and rotary products servicing the original equipment and after markets in global industry.
2009 Preliminary statementChairman's statementAs the full impact of the financial downturn became apparent, we were forced torevise down our view of performance earlier this year. Therefore, I'm pleasedto report that, economic gale force winds notwithstanding, we have been able tomeet those market expectations and sustain our previous year's performance,despite reduced turnover. This is no mean feat in the current conditions,however, we are far from complacent and further improvement is required.Overall, it's a shame that the improvements in underlying efficiency the teamat Avingtrans have worked so hard for should be overshadowed by the state ofthe global economy and its impact on the Group. Market conditions continue tobe challenging, resulting in the mixed trading results in the year to 31 May2009. Despite this, we continue to make operational improvements that we expectto bear fruit as the tide turns and markets pick up. The recovery cycle will bevariable across our three divisions and dependent on the activity of our bluechip OEM customer base and our efforts in winning new business. The quality ofthis base continues to give us confidence that we are well-placed when thestorm moderates.As anticipated, our second half performance was substantially better than inthe first half, though Group revenues are down 3.7m year on year, due to aslowdown in orders. A suite of lean manufacturing tools and cost cuttingmeasures had to be deployed aggressively to keep us on an even keel as marketsdeclined. In addition to our process change programme, we implemented a numberof tactical measures - eg: headcount reductions, short time working and salaryreductions, where appropriate (including at Board level). The underlyingsoftness in our Order Book in the second half of the year has continued intothe new financial year. However, the pace of decline has slowed and we wouldexpect to see modest recovery in the second half. Our pipeline of opportunitiescontinues to develop, for example with new Aerospace business emerging from GE,new Industrial business from Eon and new Energy business with Cummins, amongstothers.
The strength of the team has stood us in good stead this year. We have anticipated changes largely effectively, we're not scared to make tough decisions and we're pragmatic enough to go for the best available course through tricky waters, as they arise, determined to get the best shareholder return.
We believe our strategy of building market-leading niche positions in ourdefined market sectors is sound and this stance has been vindicated through thedownturn. Customers are commenting positively on our service and deliveryperformance, backed by value for money and a deepening quality ethic. Furtherwork on the divisional strategies during this year has already brought newbusiness and some exciting future growth prospects. Whilst thoughts of M&Aactivity have been subdued by the downturn, we continue to believe thatopportunities for complimentary acquisitions will present themselves as theworld economy rejuvenates. Executing our strategy will enable us to deliverstrong value growth to our shareholders and our market positions will allow usto come out of the current cycle stronger than many of our competitors.
To summarise, my guarded optimism concerning our prospects at the half year remains intact, if slightly battered by events and I look forward to steady improvement, as the storm moderates and our markets recover.
As ever, improvements in our performance depend upon our people and it is theirdedication, skill and sheer hard work that have brought us through thisdifficult period thus far. I would like once again to thank them wholeheartedlyfor their continuing commitment to Avingtrans.R S McDowellChairman9 September 2009Business ReviewGroup PerformanceTurnover: Full year Group revenue was 9% less than the prior year, coming in at 37.6m (2008: 41.2m). The decrease was mainly down to anticipated year on yearreductions at Metalcraft associated with the reduced volume of business fromSiemens and reduced volumes at Crown, pending approvals of the new SmartPoleTMproduct. The only other area to suffer a significant decline in sales wasAerospace, where sales to a major OEM were affected by changes in global marketconditions.Profit: Notwithstanding the decline in turnover, our gross profit margins heldup well at 27% (2008: 26%) and operating profit was only modestly down at 2.4m(2008: 2.6m), supported both by project completions and aggressive costcutting action in response to demand reductions. Profit before tax andamortisation was actually up year on year to 2.0m (2008: 1.8m) and EBITDA wassustained at the previous level of 4.1m (2008: 4.1m).Earnings Per Share (EPS): Adjusted diluted earnings per share, for the periodending 31 May 2009, was 6.2p (2008: 7.4p) based on 21.9m (diluted weightedaverage) shares following the placing of 7m shares in October 2008 and theissue of a further 850,000 shares in respect of part of the consideration for afurther 18.2% of the issued share capital of Sigma.Funding and Liquidity: The net cash flow from operations was just 0.4m (2008: 2.8m), but we note that working capital of 1.6m was still tied up inMetalcraft's floating production system project at year end, now complete. Netindebtedness at year end was 10.1m, 0.7m lower than at the prior year end(2008: 10.8m). Balance sheet gearing was 48.2%, down from 66.8% at 31 May2008. In addition, continued investment in the business of 2.4m shows our longterm confidence in our position going forward.Taxation: The effective rate of tax was 38.3% (2008: 32.4%). As reported in the2008 Annual Report, the withdrawal of industrial building allowances gave riseto an additional tax charge of 382k for the year ending 31 May 2009. Thisexceptional charge has been recognised in full. This was partly offset by 240kof claims for R&D tax credits, but still resulted in a greater than would benormally expected tax charge.Dividend: Whilst the Board supports a progressive dividend policy, we continueto believe that it is prudent to preserve cash in the business at present and,consequently, recommend that no final dividend should be paid (2008: 0.75p pershare). Looking forward, the Board will keep the dividend position underreview, taking account of the on-going changes in trading position in ourmarkets.StrategyAvingtrans is a precision engineering group, operating in differentiated nichesin the supply chains of many of the world's best known OEMs. Our strategy ofbuilding market-leading positions in our defined sectors is robust andbeginning to bear fruit. The overall strategic thrust focuses on three elementsacross all divisions:
* Customers: developing our key accounts and partnering or acquiring assets
to provide customers with integrated product and service offerings
* Channels: developing new channel partners in new territories and markets
with existing product capabilities
* Capabilities: strengthening core group know-how in design and manufacturing
to reduce costs and deepen our value added to our customers.
As evidence of this strategic direction, during the past financial year, we have:
* Secured new long term contracts with key customers in each division - eg
with a major Medical OEM in the Energy and Medical division.
* Developed new markets in Asia and North America with new partners - eg for
Industrial Products in China.
* Implemented projects to increase efficiency and reduce costs - eg lean
manufacturing initiatives in Aerospace leading to increased business with a
major OEM.
A particular strategic focus for all of our divisions is the development of thebusiness potential in China. We continue to invest cautiously in the Aerospacebusiness that we have already based there and the first real investments havecommenced for Metalcraft in the same geographic region. The Industrial Productsdivision has, thus far, limited itself to new channel partners and customers inChina, though we believe that wider opportunities exist to develop the linearmotion market.OperationsEnergy and MedicalThe Energy and Medical Division has seen a reduction in overall business thisyear, as the Siemens contract with Metalcraft stabilised at a lower level thanhitherto. We successfully concluded negotiations with Siemens concerning newlong term contract terms and conditions, including a new agreement on pricing,which has now been extended to October 2010. Positive discussions continue onfuture business. The net 16% reduction in turnover in the division - driven byreductions from Siemens and the new product introduction at Crown - hidesgrowth in other sectors. We were able to improve margins at Metalcraft, despitethe reduction in medical business, by tight cost control and by making the mostof the replacement business that we won last year, some examples of whichfollow.
In the medical arena, an initial order for Proton Therapy equipment secured early in the year has been followed by an agreement to provide further systems.
We are making good progress in the energy sector, with a number of excitingprospects. Chief amongst these is our developing relationship with Cummins toproduce generator frames for the Industrial Gas Turbine market. We expect thisto become a significant business stream for Metalcraft over the next few years,with deliveries to commence during the next twelve months. Nuclear sectorprospects are also promising, with positive indications on repeat nucleardecommissioning and replacement reprocessing business.Our large scale ( 4m) Oil and Gas project was largely completed by year end andhas since been signed off by the customer. The delivery of this very successfulproject bodes well for future energy projects and we are quoting on furtherprojects as a result.
In the Marine sector, Metalcraft's completion of four diving bells for UK customers and two submersible pressure hulls led to another commercial diving contract, now under construction.
The team at Metalcraft also showed great adaptability in winning an order forarchitectural steel worth just less than 1m, which will be completed during Q1/Q2 of the new financial year.Strategically, we made the first investments for our Metalcraft China facilityand we expect to commence production there during 2009. Several customers haveexpressed interest in our plans and discussions are on-going regarding newbusiness that we will base in Chengdu.For Crown International, order volumes for camera poles were very subdued inthe past 12 months, as OEMs minimised stock positions in anticipation ofstandardising on the new SmartPoleTM design. Delays in Home Office Approvalsfurther impacted sales, but we have now received first orders for the new polesfrom a number of OEMs, including first orders from Siemens, so order levelsshould begin to replenish.Crown also received a design contract from Balfour Beatty for the design of anew concept motorway variable signage pole, which we expect to lead to materialorders in the coming year.Industrial Products
Industrial Products had a very good first half year, but saw a weakening ofdemand over the second half as market conditions deteriorated worldwide.Nonetheless, with revenues up by 16% compared with last year, this was still avery successful year for Jena-Tec, with the increase in business also carryingthrough to improved margins. The division is delivering its strategy ofdeveloping niche, high-precision engineered components, coupled with adiversification of its product strategy to include factored products andrelated equipment.
We responded to the market slowdown in the second half with headcount reductions and cost cutting to right size the operations for current conditions. These were largely successful in sustaining business performance to our financial year end.
Jena-Tec has successfully opened up new sales channels in linear motion and developed new routes to market in China, USA, Korea and India, amongst others, with large new orders being won, eg in China, as previously announced. Our efforts to reduce our cost base by sourcing parts from India and China have also been successful and we will continue to expand on this initiative.
The acquisition of the trade and assets of the Moss Group in February 2009 provides access to the servicing and repair aftermarket and specialist machine attachments that compliment the division's high precision product range. We have already seen some new orders in this area and future prospects are bright.
The global machine tools market remains sluggish and this will slow our development in FY10, though we will seek to counter this with wider product offerings in linear motion and actuation solutions, directly and in conjunction with OEM partners.
AerospaceThe Aerospace Division has had a disappointing year overall from a financialpoint of view, though we can take positives out of the progress made in eachbusiness. The decline in civil aerospace markets is quite severe from a supplychain perspective, with each of the businesses suffering from delays and cutsto programme volumes in various ways, resulting in an overall decline inturnover of 13%. To improve efficiency and to manage this decline, the divisionhas cut costs accordingly, though this was not enough to avoid a small loss inthe year, allowing for the fact that on-going material investment in Sigma,China continues.The decline in global aerospace markets has put a brake on our activities inChina, with all customers significantly delaying orders and deliveries for newprogrammes that had been scheduled to commence in volume by now. As a result Sigma has not yet reached break-even as expected, though we are still makingprogress - just more slowly than we previously planned. Strong support for ourChinese capability continues to be expressed by major aerospace customers andwe have introduced over 400 new parts to date for customers. We believe thatthe order flow will still allow us to achieve profitability during the newfinancial year. During the year, we completed a deal to acquire most of theremaining equity in Sigma and settle future deferred consideration obligations.B&D Patterns has worked hard on improving quality and delivery performance thisyear and this has been underpinned by a new long term agreement with theirbiggest customer. However, global aerospace market conditions have meant thatthe business has run hard to stand still, with sharp headcount reductions, siteconsolidation and cost cutting measures all being rolled out to maintain ourposition. Conversely, we made excellent progress in our lean manufacturingdeployment, as recognised by a 60% increase in business from one key customerand we completed the certification of a new fastener product range in recordtime, securing 0.5m of initial orders in the process.
After year end, in July 2009, we came to an agreement in our favour with the former owners of B&D to settle our on-going warranty claim for 1.25m, inclusive of costs.
Although C&H had a reasonable year overall, they also saw some softening indemand, as the aerospace supply chain adjusted to lighter forward order booksand this necessitated headcount reductions and tight cost control. The new C&Hfacility in Cheltenham ramped up capacity successfully, providing a range ofpolishing services, principally to Messier Dowty at present.
People
We were delighted to welcome Steve McQuillan as CEO to the Board in October2008. This allowed Roger McDowell to move permanently into the post ofNon-executive Chairman. Post year end, we have further strengthened the Boardwith the addition of Dr Graham Thornton, as a Non-executive Director, fromSeptember 2009. Graham's considerable experience across a number of pertinentsectors will add greatly to the Board's strength.We also strengthened the Divisional senior management teams in the threedivisions, as we seek to improve our long term management capability across allthe businesses. The introduction of the standard CSOP share option schemerecently announced will allow us to align rewards for our key people with theinterests of shareholders.Although the recession has temporarily increased the availability of skilledengineering and production staff, we believe that a structural shortage inthese skills still exists in the UK. Therefore, Metalcraft was delighted to bechosen to host the Fenland Engineering School of Excellence at Chatteris, whichwill enable us to grow and access young technical talent as it develops in
thisarea.OutlookGiven on-going global economic weakness, risks of reduced demand in theAerospace and Industrial Products divisions remain prevalent. Actions that wetook to cut costs were very important to insulate ourselves to some degree fromthe market changes that are still taking place. The markets for our Energy andMedical division have also been affected and, thus, they have also taken costreduction actions to adjust to changing sector conditions as required.Whilst we do not expect there to be a swift recovery in any of our majormarkets, the strategic development work that we have undertaken will help us totake advantage of any fragile improvements in market conditions by using ourpositions to win new business, both with existing customers and with newaccounts. Therefore, we expect steady improvement in our financial performancefor the coming year, unless there is further material deterioration in marketconditions.Our strategy to focus on differentiated highly engineered product niches withlong term growth and sustainable competitive advantage, thus offering a degreeof protection to cyclical market weaknesses. Overall, we remain well placed tobenefit from structural changes in our markets and to grow as global industrialmarkets recover.Roger McDowell Steve McQuillan Stephen KingChairman Chief Executive Officer Finance Director9 September 2009 9 September 2009 9 September 2009Consolidated Income Statementfor the year ended 31 May 2009 Year to Year to 31 May 31 May 2009 2008 GBP'000 GBP'000 Revenue 37,559 41,247 Cost of sales (27,427) (30,324) Gross profit 10,132 10,923 Distribution costs (955) (944) Administrative expenses (6,706) (7,249) Operating profit before share based 2,471
2,730
payments and amortisation / impairment of
intangibles Share based payment 88 (25) Amortisation of intangibles from business (137) (137)combinations Operating profit 2,422 2,568 Finance income 2 6 Finance costs (595) (880) Profit before taxation 1,829 1,694 Taxation (701) (549) Profit for the financial year 1,128 1,145 Earnings per share : From continuing operations - Basic 5.1p 6.5p - Diluted 5.1p 6.4p
All the above results are from continuing operations
Consolidated statement of total recognised income and expense for the year ended 31 May 2009
Year to Year to 31 May 31 May 2009 2008 GBP'000 GBP'000
Exchange differences on translation of 338
335foreign operations
Net movement recognised directly in equity 338
335 Profit for the financial year 1,128 1,145 Total recognised income and expense for the 1,466 1,480year Consolidated cash flow statementfor the year ended 31 May 2009 Note Year to Year to 31 May 31 May 2009 2008 GBP'000 GBP'000 Operating activities
Cash flows from operating activities 356
2,819 Finance costs paid (597) (902) Income tax paid (145) (757)
Net cash (outflow)/ inflow from operating (386)
1,160activities Investing activities Finance income 2 6 Acquisition of subsidiaries - (16) Acquisition of investment - (219) Purchase of intangible assets (420) (411)
Purchase of property, plant and equipment (2,022)
(607)
Proceeds from sale of property, plant and 19
53equipment
Proceeds from sale of investments -
19
Net cash used in investing activities (2,421)
(1,175) Financing activities Dividends paid (132) (220) Repayments of borrowings (642) (1,044)
Repayments of obligations under finance (1,103)
(873)leases
Proceeds from issue of ordinary shares 3,654
34 Borrowings raised 1,271 869
Net cash inflow/(outflow) from financing 3,048
(1,234)activities
Net increase/(decrease) in cash and cash 241
(1,249)equivalents
Cash and cash equivalents at beginning of (2,534)
(1,302)period
Effect of foreign exchange rate changes 38
17
Cash and cash equivalents at end of year (2,255)
(2,534)
Cash generated from operations:
for the year ended 31 May 2009
Year to Year to 31 May 31 May 2009 2008 GBP000 GBP000 Continuing operations Profit before income tax 1,829 1,694 Adjustments for: Depreciation 1,434 1,287
Amortisation and impairment of intangible 264
227assets
(Profit) on disposal of property, plant (9)
(20)and equipment
(Profit) on disposal /impairment of -
(7)investment Finance income (2) (6) Finance expense 595 880
Share based payment (credit)/charge (88)
25 Changes in working capital (Increase) in inventories (255) (327)
(Increase)/decrease in trade and other (1,845)
1,660receivables
(Decrease) in trade and other payables (1,584)
(2,619) Other non cash charges 17 25
Cashflows from operating activities 356
2,819 Summarised consolidated balance sheetat 31 May 2009 2009 2008 GBP'000 GBP'000 Non current assets Goodwill 10,242 10,242 Other intangible assets 1,941 1,784 Property, plant and equipment 11,308 10,560 Deferred tax 38 24
Available for sale financial assets 219
219 23,748 22,829 Current assets Inventories 6,952 6,480 Trade and other receivables 8,914 6,984 Current tax asset 321 196 Cash and cash equivalents 634 548 16,821 14,208 Total assets 40,569 37,037 Current liabilities Trade and other payables (6,323) (7,278)
Obligations under finance leases (1,247)
(935) Borrowings (3,543) (3,591) Current tax liabilities (759) (489) Total current liabilities (11,872) (12,293) Non-current liabilities Borrowings (4,264) (5,034) Obligations under finance leases (1,729) (1,789) Deferred tax (1,436) (1,003) Deferred consideration (200) (750) Total non-current liabilities (7,629) (8,576) Total liabilities (19,501) (20,869) Net assets 21,068 16,168 Equity Share capital 1,274 882 Share premium account 9,534 6,272 Capital redemption reserve 814 814 Merger reserve 402 402 Translation reserve 636 298 Other reserves 180 180 Retained earnings 8,228 7,320
Total equity attributable to equity 21,068
16,168holders of the parent
Notes to the preliminary statement
31 May 20091. Segmental analysisYear ended 31 May 2009 Aerospace Energy and Industrial Unallocated Total Medical Products Central items GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue 10,716 17,509 9,334 - 37,559 Operating (loss)/profit (73) 1,583 1,051 (139) 2,422 Net finance costs (593) Taxation (701) Profit after tax 1,128 Segment assets 14,917 17,058 8,250 344 40,569 Segment liabilities (5,243) (5,687) (3,323) (5,248) (19,501) Net assets/ 9,674 11,371 4,927 (4,904) 21,068(liabilities) Capital expenditure 798 388 1,256 - 2,442 Depreciation and 726 552 420 - 1,698amortisation Year ended 31 May 2008 Aerospace Energy and Industrial Unallocated Total Medical Products Central items GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue 12,333 20,863 8,051 - 41,247 Operating profit/(loss) 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 - 1,514amortisation Geographical segment 2009 2008 2009 2008 2009 2008 Revenue Revenue Net Net Capital Capital assets assets expenditure expenditure GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 United Kingdom 29,163 31,075 16,420 11,895 1,145 647 Europe 7,829 7,954 5,397 4,908 1,058 159 North America 1,407 2,607 (417) (383) - 1 Rest of the World 616 810 (332) (252) 239 211 Eliminations (1,456) (1,199) - - - - 37,559 41,247 21,068 16,168 2,442 1,018 2. Taxation 2009 2008 GBP'000 GBP'000 Current tax 283 563 Deferred tax 418 (14) 701 549 3. Earnings per share 2009 2008 No No Weighted average number of shares - basic 21,933,317
17,604,810
Warrant/ Share Option adjustment 6,961 174,615 Weighted average number of shares - diluted 21,940,278 17,779,425 GBP'000 GBP'000
Earnings attributable to shareholders 1,128
1,145 Share-based payments (88) 25 Amortisation of intangibles 137 137
Sigma deferred consideration release (201)
- Withdrawal of IBA's 383 -
Adjusted earnings attributable to shareholders 1,358
1,307 Basic earnings per share 5.1p 6.5p
Adjusted basic earnings per share 6.2p
7.4p
Diluted earnings per share 5.1p
6.4p
Adjusted diluted earnings per share 6.2p
7.4p
4. Preliminary statement
This preliminary statement, which has been agreed with the auditors, was approved by the Board on 9 September 2009. It is not the Group's statutory accounts. Statutory accounts will be sent to shareholders shortly.
The statutory accounts for the two years ended 31 May 2008 and 2007 receivedaudit 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 ended31 May 2008 have been delivered to the Registrar of Companies but the 31 May2009 accounts have not yet been filed.
5. Annual report and Accounts
The Report and Accounts for the year ended 31 May 2009 will be posted to shareholders on or around 21 September 2009. Further copies will be available from the Avingtrans' 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 14 October 2008.
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