Last checked at 10 Sep 2008 07:00
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 criticalcomponents and associated services to the medical, energy, industrial andglobal aerospace sectors is pleased to announce its Final Results for the Yearended 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 pastsix months we have developed a clear strategy to deliver much improved returnsfor shareholders. The cornerstone of this strategy is having the ability todevelop and deliver the highest quality products through our engineeringexpertise, in depth market knowledge, outstanding customer service and uniquelow cost manufacturing base in China. All this has to be backed-up by goodpeople and strong senior management with the know how to deliver our commercialgoals. I now believe that everything is in place and I look forward withconfidence 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 statementChairman's statement
2008 proved to be a challenging year for Avingtrans. The Group's financialperformance, although meeting revised expectations, was, in overall terms,unacceptable. I joined the Board on 22 February 2008 and was appointed Chairmanand acting CEO on 10 March 2008 and have now conducted a thorough review of thebusiness.
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. Werecognise that this will only be achieved by adopting a clear strategy and thensuccessfully executing it. Central to our approach is an ethos of outstandingcustomer service backed up by good people, highest quality products, in depthknowledge of our markets and strong engineering know-how. If we remain focussedthe 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 andimpairment) 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 afull year of debt and increased working capital following the B&D acquisitionand the changing business of some of the key subsidiaries.The effective rate of tax was 32.4% (2007: 30.6%) compared with a standard rateof tax of 30%. The difference between the actual and standard rate is primarilydue 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). Thenet debt at the year-end was ‚£10.8m (2007: ‚£10.5m) resulting in a gearing of66.8% (2007: 70.8%) on net assets of ‚£16.2m (2007: ‚£14.9m).During the year capital projects totalling ‚£0.6m (2007: ‚£1.3m) were implementedacross the Group and ‚£0.4m (2007: ‚£0.3m) was spent on development costs relatedto the future introduction of new products.Divisional performanceEnergy and Medical DivisionStainless MetalcraftMedicalAgainst challenging conditions in its medical related markets, Metalcraft wasable to maintain margins, mitigating the impact of a slowdown in sales. It wasanticipated that a change in supply chain thinking on behalf of its principalcustomer, Siemens Magnet Technology (SMT), would reduce demand for its largemedical components. This impact did not take place until later in the year, butwas then exacerbated by a downturn in world demand for NMR and MRI equipment.This was reflected in lower than expected requirements from SMT and othercustomers. However, we have recently signed a new agreement with SMT securingfuture 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) showstrong growth and Metalcraft has already secured ‚£4 million of orders for 1stand 2nd stage separation equipment.Alternative energy is another area of business which Metalcraft expects toexploit in the coming years. Again, fossil fuel energy costs have sparked highlevels of activity in this field. Metalcraft secured an early supply agreementfor large Fuel Cell components for which it delivered prototypes. Furtherorders have been secured for the current year for test and pre-productionsystems. Metalcraft's long association with the nuclear reprocessing industryshows signs of significant potential, both in decommissioning and new builds.The Diving and Diving Support markets offer important potential in the energysector. During the year Metalcraft delivered two pressure hulls for rescuecraft for both the Korean and Singaporean Navies, as well as equipment forcommercial diving operations. At present the order book for the current year isstrong with over ‚£1 million of orders already underway, mainly for diving bellsand 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 highfor 2009, having signed an important joint venture style agreement which givesus immediate access to production facilities and a key client relationship.The model of design, engineering, proof of concept and prototyping in the UKand then bulk manufacture in China is exciting many of our existing clients andwe now have a number of important potential orders. We anticipate that thismodel will enable us to drive strong growth in the years to come in both theMetalcraft and Sigma businesses.
Crown
On a similar level of sales as the previous years, Crown managed to improve itsreturn 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 Officeapproval for several key customers. Additional opportunities are being pursuedin the wider `intelligent' road signage market. For the first time, asignificant proportion of Crown's sales came from overseas markets (over 23%).AerospaceSigma
Sigma, our start up manufacturing facility in China, has now started volumeproduction, but made no material contribution to sales in the year. Theestablishment of Sigma has taken longer than planned and the learning curve hasbeen steep. However, this experience will stand us in good stead in the future.We believe that our early position gives us significant competitive advantageand a solid platform for growth. We have a strong pipeline of multi ‚£mopportunities with `blue chip` aerospace companies. It is critical that weexploit our position: this requires us to further invest, whilst seekingaggressive growth.
B&D Patterns
B&D has stabilised the business with its major client with whom it has nowannounced an important long term agreement - an important advance on theposition last year. The business is now trading profitably and we have improvedboth controls and management information. A proportion of its production can bemigrated to Sigma, improving margins and allowing consolidation of two unitsand releasing for sale a factory in Hinckley. We are continuing to vigorouslypursue an action, under warranties, against the vendors of the B&D business andare advised that we have a strong case.
C&H Precision
C&H continues to be a strong contributor, but finished the year slightly softerdue to supply chain issues with a key customer. C&H continues to be service ledand is actively considering adding new processes to widen its offering. It hasrecently opened a new facility in Cheltenham in response to strong demand fromcustomers in this area.Industrial Products
The Jena Tec division had an outstanding year seeing strong demand for itsprecision machine tool components as requirements grow worldwide for machinetool systems in diverse fields ranging from medical and automotive through toaerospace and power generation. Sales revenues increased within the year byover 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 investmentat Jena Tec in new high speed machining technology to consolidate its positionas a precision manufacturer and to match capacity demands. With significantongoing development of new linear and rotary products being launched to market,Jena Tec expects to continue to aggressively grow its international penetrationwithin 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 thebest of UK based know how with a China based volume manufacturing has strongappeal to key customers.We will continue to closely monitor the performance of each of our divisions,whilst seeking complimentary acquisitions, particularly in the Aerospace andEnergy 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. Kenmade a major contribution to development of Avingtrans. Steve Lawrence alsostepped down - his operational skills and experience will be missed. Stevemerits the thanks and best wishes of the Board for the future. Stephen Bruh, along serving non-executive, left to pursue his personal business interests andwe 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. Wewill then have a fully refreshed team, capable of leading the Group to a returnto strong growth and continued success.In accordance with the Articles of Association, Stephen King retires from theBoard by rotation and Steve McQuillan, Peter Kenny and myself offer themselvesfor re-election at the AGM scheduled for 16 October 2008.
Dividend
The Directors are recommending to the shareholders at the AGM a final dividendof 0.75p per share making a total of 1.25p for the year (2007: 1.25p). Thiswill be paid on 24 November 2008 to shareholders on the register at 10 October2008.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 ourorder book. However, to achieve or outstrip the demanding targets we have setourselves, we need to win certain new business (and have clear visibility ofthese potential orders). Subject to our continued success in closing this workand timing considerations, we look forward to a substantially improvedperformance.
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 McDowellChairman10 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
122year
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
128equipment
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)
1,224period
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
2,999assets
(Profit) on disposal of property, plant (20)
(121)and equipment
(Profit) on disposal /impairment of (7)
3investment 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)
1,500payables 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
14,849holders of the parent
Notes to the preliminary statement
31 May 20081. Segmental analysisYear 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 - 1,514amortisation 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 - 1,498amortisation 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 3,203shareholders 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 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 2007 have been delivered to the Registrar of Companies but the 31 May2008 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.
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