Avingtrans Regulatory News (AVG)

13 Sep 2007 07:00

Embargoed: 0700hrs, 13 September 2007

Avingtrans plc ("Avingtrans" or the "Group") Final Results for the Year Ended 31 May 2007 Highlights * Turnover up significantly to ‚£40.0m (2006: ‚£32.5m) * Profit before tax increased to ‚£2.6m (2006: ‚£2.4m) * Basic earnings per share before goodwill amortisation of 13.3p (2006: 16.0p)

* Gearing of net debt to net assets at 31 May 2007 was 63.1% (2006: 26.0%)

* Proposed final dividend of 0.75p per share (2006: 0.5p) totalling 1.25p (2006: 1.0p) for the year

* Acquisition of B&D for consideration of ‚£6.9m completed on 21 September

2006

* Acquisition of 75% of Sigma for consideration of ‚£0.3m completed on 19 June

2006

Ken Baker, Chairman, commented,

"The year to 31 May 2007 has proved a further period of growth andconsolidation. Though we suffered some setbacks, we dealt with themsuccessfully and the core operations have predominantly regained theirstrength. Our acquisitions of Sigma and B&D during the year have formed thebedrock of the newly established aerospace division, servicing global markets,the potential of which could form an exciting and dramatic part of Avingtrans'future."Contacts:Avingtrans plc Tel. 01159 499 020 Ken Baker, Chairman

Stephen King, Finance Director

KBC Peel Hunt Ltd (Nominated Adviser and Broker) Tel. 020 7418 8900 David Anderson Hansard Group Tel. 020 7245 1100 Ben Simons Chairman's statement

I am pleased to announce the results of Avingtrans plc for the year ending 31May 2007, another period of growth in sales and assets for the Group. Thegrowth included two aerospace acquisitions which were completed during theyear; 75% of Sigma Precision Components Limited in June 2006, together with100% of B&D Patterns Limited in September 2006. The acquisition of B&Dcontributed to a growth of order intake, sales turnover and EBITDA (earningsbefore interest, tax, depreciation and amortisation) to new record levels.Stainless Metalcraft Limited and C&H Precision Finishers Limited, our medicalengineering and turbine blade facilities, were less buoyant than expectedduring the period, caused by a significant reduction in order uptake early inthe year, on agreed schedules from our major medical component customer and adelay in supply of turbine blades for repolishing in the third quarter fromRolls Royce.

Existing operations for the Group finished only marginally ahead of the previous year's performance instead of the growth planned for the period.

Higher interest payments from loans used to support the funding of theacquisitions, an increased tax charge and a greater number of shares in issueall contributed to earnings per share below expectations for the year and belowthe previous year ended 31 May 2006.Much of our effort at Metalcraft in this period was engaged in successfullyseeking replacement work for the future to continue its pattern of profitablegrowth in the supply of high technology components for the medical and researchsectors in Europe, Asia and North America with a number of new customers andprojects being secured. Business at the Jena Group of companies continued togrow successfully during the period and finished ahead of plan.As a result of the lower than expected growth in our continuing businessesduring the period the Group made an announcement in May 2007 that year endresults would not meet the Board's expectations for the year ending 31 May2007. The Board dealt with these issues during the remainder of the year andcontinued its growth programme through product development, market developmentand ongoing investment in productivity enhancing processes and machinery.

Financial performance

EBITDA was ‚£5.0m (2006: ‚£4.1m) up 24% on improved turnover of ‚£40.0m (2006: ‚£ 32.5m), an increase of 23%.

Operating profit for the period was ‚£3.3m (2006: ‚£2.8m). Profit before taxincreased to ‚£2.6m (2006: ‚£2.4m). Profit after tax following an increased taxcharge fell to ‚£1.7m (2006: ‚£1.9m), representing a 10.0% return on net assets(2006: 15.3% as restated).

Basic earnings per share before goodwill amortisation was 13.3p (2006: 16.0p). Diluted earnings per share before goodwill amortisation was 12.8p (2006: 15.0p).

Cash flow from operating activities for the year was ‚£3.5m (2006: ‚£ 2.7m). Thenet debt at the year-end was ‚£10.5m (2006: ‚£3.3m) resulting in a gearing of63.1% (2006: 26.0%) on net assets of ‚£16.6m (2006: ‚£12.7m).The pre-tax figures for the year ended 31 May 2007 and comparative figures forthe year ended 31 May 2006 have been adjusted in respect of the adoption of FRS20 `Share based payment' to the extent of ‚£67,000 and ‚£26,000 respectively.During the year capital projects totalling ‚£1.9m (2006: ‚£1.2m) were implementedacross the Group and ‚£279,000 was spent on development costs related to thefuture introduction of new products (2006: ‚£9,000).

Dividend

The Directors, in view of the continuing strength and growth prospects of theGroup together with the addition of Sigma UK, Sigma China and B&D, arerecommending to the shareholders at the AGM a final dividend of 0.75p per sharemaking a total of 1.25p for the year (2006: 1.0p). This will be paid on 23November 2007 to shareholders on the register at 19 October 2007.

Acquisitions and investments

The acquisition of Sigma, a British based aerospace company with plans todevelop an aerospace manufacturing facility in Chengdu, China, for aconsideration of ‚£0.3m was completed on 19 June 2006. Funding for theacquisition was from the Group's cash reserves. Since June 2006 further fundingof ‚£0.6m has been made available to build, equip, staff and obtainaccreditations for a new 30,000 square feet aerospace manufacturing plant inChengdu, China. The new plant was officially opened on 3 April 2007 aftergaining all necessary accreditations to commence supplying test components tothe European and American aerospace industries in March 2007. Letters of intentin excess of ‚£2m for product supply were received during the year.The acquisition of B&D, an aerospace specialist supplier to Rolls Royce andother aero engine manufacturers, for ‚£6.9m was completed on 21 September 2006.The funding for the acquisition was raised through the issue of new shares at aprice of ‚£1.25 each together with further loan capital from the Group's bankersHSBC. During the eight months of ownership of B&D a great deal of effort hasbeen put into improving customer relations, development of new markets and thestrengthening of management. This work is continuing.Development of new traffic camera posts at Crown UK continued during the yearas did our collaboration with Loughborough University based Vehicle OccupancyLimited on the development of a new, unique, laser based camera for thedetection of the number of occupants in a motor vehicle passing within itsrange. A prototype of the device, which could be employed in a wide range oftraffic management situations, was successfully demonstrated at the Traffexexhibition in Birmingham in April 2007. Work on a pre-production unitcontinues.

Acquisitions continue to be part of the growth plan of the Group and we continue to investigate opportunities as they arise.

Review of the year

The year under review has been varied. The first half, ended 30 November 2006,as reported in our interim results was, for the Group, a strong period of orderintake, sales and profitability and included the acquisition of 75% of Sigmaand 100% of B&D. Some concern on order uptake on scheduled deliveries of MRIscanner units to our major customer for these units arose during the first halfwith sales significantly lower than programmed. It was believed at that timethat the shortfall would be made up in the second half.The second half of the year ended 31 May 2007 saw continuing success in theGroup's development of Sigma's Chinese facility and the integration of B&D intothe Group with continued growth at the Jena Group, our German operation, andwork from new customers for Metalcraft. However, the significant downturn inorder uptake compared to previously agreed levels by our major customer formedical components at Metalcraft, as reported earlier, together with a supplierdelay at C&H, our turbine blade finisher for Rolls Royce and the order delaysfrom Network Rail on Crown UK for signal posts for the West Coast line,affected our internal performance. A number of successful actions were taken tominimise the effect on our growth programme including personnel reductions,order replacement programmes and inventory reduction. It was not, however,possible to replace the whole of the MRI scanner component orders not taken upand the year ended at a level of sales and pre-tax profitability, though higherthan 2006, below our expectations.

Directors and senior management

Since the year end the Group has reorganised its subsidiaries into threedivisions: Aerospace, Medical and Research and Industrial Products. The headsof these divisions report to the Managing Director. It is felt that this newstructure will improve control and reporting as we grow.

In accordance with the Articles of Association, Stephen Bruh and Steven Lawrence retire from the Board by rotation and offer themselves for re-election at the AGM scheduled for 18 October 2007.

Share warrants

Steven Lawrence exercised and retained the balance of his share warrants (112,000) in the company in May 2007. Ken Baker retains his outstanding share warrants (208,000).

OutlookFollowing the reduction in demand for MRI scanner components in 2006 and 2007the Group has been active and successful in seeking opportunities with othercompanies requiring supplies of high technology cryogenic pressure vessels thatare the speciality of Metalcraft, our largest company based in Cambridgeshire.Orders with long term future growth potential have been particularly targetedand secured. These include components for two new medical customers,submersibles for ocean rescue modules and casings for a new type of power unitbeing developed by a world leader in aerospace engine technology. These longterm projects, if successful, will increasingly contribute profits to the groupover the next 3 to 5 years.The Group continues to develop its aerospace capability with repeat and neworders from Rolls Royce at B&D. Sigma has now received accreditation from anumber of potential US and EU customers and is processing a number of start-uporders and quotations. C&H has resumed normal service with its major customerafter some disruptions in 2007 and has opened a new facility in the Bristolarea to support a regional growth in demand.

The Jena Group has started the new year with a continued significant upturn in demand for its product on the back of the strength in the German machinery market and is currently enjoying record levels of orders.

After the year end, on 1 June 2007, the Group acquired 7% of Vehicle Occupancy Limited for a consideration of ‚£200,000 and is looking forward to the development of the pre-production unit.

As an AIM traded company, we are not required to adopt IFRS until the financialyear ending 31 May 2008. Our IFRS conversion project is progressing well and welook forward to presenting our interim results for the six months to 30November 2007 under IFRS.

Despite the recent turbulence in commodity prices and the financial markets the outlook for the Group remains positive for growth in the current year.

In closing I should like to thank, on behalf of the Board of Directors, all our employees for their efforts in the past year.

K M BakerChairman13 September 2007Consolidated profit and loss accountfor the year ended 31 May 2007 2007 2006 (as restated) Note Existing Acquisitions Total operations ‚£'000 ‚£'000 ‚£'000 ‚£'000 Turnover 1 32,415 7,611 40,026 32,490 Cost of sales (24,579) (5,227) (29,806) (24,813) Gross profit 7,836 2,384 10,220 7,677 Selling and distribution (685) (200) (885) (595)expenses Administration expenses (4,356) (1,673) (6,029) (4,313) Operating profit: Operating profit before 3,238 693 3,931 3,188goodwill amortisation and share based payment expense Share based payment expense (64) (3) (67) (26) Goodwill amortisation (379) (179) (558) (393) Operating profit 2,795 511 3,306 2,769 Interest receivable 16 4 Interest payable (681) (349) Profit on ordinary activities 1 2,641 2,424before taxation Taxation on profit on ordinary 2 (972) (484)activities Profit for the financial year 3 1,669 1,940 Earnings per share - basic 3 9.9p 13.3p Earnings per share - diluted 3 9.6p 12.5p

All the above results are from continuing operations

Consolidated statement of total recognised gains and losses for the year ended 31 May 2007

2007 2006 ‚£'000 ‚£'000

Profit for the financial year 1,669

1,940

Other recognised gains and losses - exchange (losses)/gains on translation of (31)

8foreign subsidiaries

Total recognised gains and losses relating to 1,638

1,948the year - Prior year adjustment 10

Total gains and losses recognised since last 1,648

annual report

Reconciliation of movements in shareholders' funds

2007 2006 (as restated) ‚£'000 ‚£'000

Profit for the financial year 1,669

1,940 Issue of shares 2,441 585

Exchange (losses)/gains on translation of (31)

8foreign subsidiaries Dividends (165) (148)

Share based payment adjustment 67

26

Net change to shareholders' funds 3,981

2,411 Shareholders' funds at 1 June 12,656 10,245 Shareholders' funds at 31 May 16,637 12,656 Summarised consolidated cash flow statementfor the year ended 31 May 2007 2007 2006 ‚£'000 ‚£'000

Net cash inflow from operating activities (see 3,522

2,710below)

Returns on investment and servicing of finance (668)

(365) Taxation (356) (529) 2,498 1,816

Capital expenditure and financial investment (1,449)

(396) Acquisitions (8,185) (100)

Equity dividends paid to shareholders (165)

(148)

Management of liquid resources -

- Financing 4,776 (687)

(Decrease)/increase in net debt (see note 4) (2,525)

485 Note: reconciliation of operating profit to net cash inflow from operatingactivities 2007 2006 (as restated) ‚£'000 ‚£'000 Operating profit 3,306 2,769 Depreciation charges 1,154 898

Amortisation of development costs 15

- Goodwill amortisation 558 393 EBITDA 5,033 4,060

Profit on sale of tangible fixed assets (121)

(6) Impairment of investment 3 11

(Increase)/decrease in stocks (1,529)

1,127

(Increase)/decrease in debtors (1,465)

595

Increase/(decrease) in creditors 1,500

(3,103) Share based payments 67 26 Other non-cash charges 34 -

Net cash inflow from operating activities 3,522

2,710 Summarised consolidated balance sheetat 31 May 2007 2007 2006 (as restated) ‚£'000 ‚£'000 Fixed assets Intangible assets 12,365 6,777 Tangible assets 11,148 6,203 Investments 12 15 23,525 12,995 Current assets Stocks 5,968 3,190 Debtors 8,694 4,931 Cash at bank and in hand 1,216 1,398 15,878 9,519

Creditors: amounts falling due within one (14,711)

(6,284)year Net current assets 1,167 3,235

Total assets less current liabilities 24,692

16,230

Creditors: amounts falling due after more (7,924)

(3,334)than one year Provisions for liabilities (131) (240) Net assets 16,637 12,656 Capital and reserves Called up share capital 879 771 Share premium account 6,241 4,310 Capital redemption account 813 813 Merger reserve 402 - Other reserves 180 180 Profit and loss account 8,122 6,582 Equity shareholders' funds 16,637 12,656

Notes to the preliminary statement

31 May 20071. Segmental analysisClass of business Turnover Profit before Tax Net Assets 2007 2006 2007 2006 2007 2006 (restated) (restated) ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000By class of business Precision Engineering 18,722 10,189 1,788 1,154 6,466 3,844Medical and Scientific 21,304 22,301 1,756 2,055 4,351 4,203Unallocated central items - - (238) (440) 5,820 4,609Net Interest - - (665) (345) - -Total 40,026 32,490 2,641 2,424 16,637 12,656

Turnover by geographical market

Precision Medical Total Total Engineering and Scientific 2007 2007 2007 2006 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Turnover by geographical origin United Kingdom 13,680 21,304 34,984 27,825 Europe 4,956 - 4,956 4,588 North America 74 - 74 77 Rest of World 12 - 12 - Total 18,722 21,304 40,026 32,490 Turnover by geographical destination United Kingdom 11,347 19,680 31,027 25,459 Europe 6,350 331 6,681 5,477 North America 817 1,293 2,110 1,408 Rest of World 208 - 208 146 Total 18,722 21,304 40,026 32,490 2. Taxation 2007 2006 (restated) ‚£'000 ‚£'000 UK corporation tax 506 307 Foreign tax 185 129 Current taxation 691 436 Deferred taxation 281 48

Group tax on profit on ordinary activities 972

484 3. Earnings per share 2007 2006 No No

Weighted average number of shares - basic 16,805,321 14,544,793

Warrant/ Share Option adjustment 545,151 1,029,810

Weighted average number of shares - diluted 17,350,472 15,574,603

‚£'000 ‚£'000 (restated) Earnings attributable to shareholders 1,669 1,940 Earnings attributable to shareholders before 2,227 2,333goodwill amortisation Basic earnings per share 9.9p 13.3p Basic earnings per share before goodwill 13.3p 16.0pamortisation Diluted earnings per share 9.6p 12.5p Diluted earnings per share before goodwill 12.8p 15.0pamortisation 4. Analysis of net debt 1 June Cashflow Acquisition Other non-cash Exchange move 31 May ments 2006 (excl cash changes 2007 and overdrafts) ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Cash at bank and 1,398 (180) - - (2) 1,216in hand Bank overdrafts (175) (2,345) - - 2 (2,518)and loans 1,223 (2,525) - - - (1,302) Bank loans (2,849) (3,679) - (34) - (6,562) Hire purchase (1,665) 927 (1,339) (563) (2) (2,642)leases and finance leases (4,514) (2,752) (1,339) (597) (2) (9,204) Net debt (3,291) (5,277) (1,339) (597) (2) (10,506) 5. Preliminary statement

This preliminary statement, which has been agreed with the auditors, was approved by the Board on 12 September 2007. 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 2006 and 2005 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 2006 have been delivered to the Registrar of Companies but the 31 May2007 accounts have not yet been filed.