Last checked at 10 Feb 2010 07:00
10 February 2010 Avingtrans plc ("Avingtrans" or the "Group") Interim results for the six months ended 30 November 2009 Avingtrans plc, which designs, manufactures and supplies critical componentsand associated services to the medical, energy, industrial and global aerospacesectors, today announces its interim results for the six months ended 30November 2009.
Financial Highlights (vs previous half year, except where stated)
* Turnover decreased by 23% to £13.5m (H1 2009: £17.5m) * Gross profit margin decreased to 23% (H1 2009: 28%)
* Fully diluted, adjusted1 EPS of 1.2 pence per share (H1 2009: 2.1 pence per
share) * Cash generated from operations up to £2.6m (H1 2009: £1.9m)
* Net debt down to £8.5m, representing gearing of 37% (2009 year end: £10.1m
and 37%)
1 - fully diluted earnings per share adjusted to add back amortisation and exceptional items
Operational highlights
With all divisions experiencing significant turnover reductions in the firsthalf, highlights were a little thinner on the ground than usual. However, weare pleased to note the following important events:
* Sigma China achieved its first quarterly profit in the second quarter of
our financial year, building on previous momentum and winning the Cathay
Pacific Rising Stars Award.
* The Aerospace division secured an initial 4-year contract worth €4m for the
supply of self-locking nut solutions to a major European OEM.
* The warranty claim against the former owners of B&D Patterns was settled in
the first half, returning £932k cash to the Group.
* A new £8m contract is being finalised with Cummins, providing Metalcraft
with volume production for Generator Frames with the Cummins UK business
over the next 3 years.
* Metalcraft are making significant headway in the Nuclear sector, winning
orders with Costain and Doosan Babcock and achieving accreditation with
AREVA for Nuclear new build supply in the UK.
* Crown received the first major order (£1.25m) from Balfour Beatty for its
new motorway signage product. * Jena Tec received first orders worth an initial £0.5m from a leading European utility company for safety-critical actuation systems, for delivery in the second half of this year.
Commenting on the results, Roger McDowell, Chairman, said:
"The protracted downturn in global manufacturing seriously affected our resultsin the first half, which was disappointing. We believe that the last six monthsrepresented the nadir in our fortunes, however, and we continue to placeconfidence in our strategy which is beginning to bear fruit, with importantcontract wins in the period. The first half order weakness means that we willnot meet the original management expectation by year end, but we expect thesecond half to deliver results closer to normality."
Enquiries:
Avingtrans plc tel. 01159 499 020
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Finance Director
KBC Peel Hunt Ltd (Nominated Adviser and Broker ) tel. 020 7418 8900
Matthew Tyler / Richard Kauffer
Hansard Communications tel. 020 7245 1100
John Bick
About Avingtrans plc:
Avingtrans has become a significant organisation in the design, manufacture and supply of critical components and associated services to global industrial markets from three divisions: aerospace, energy and medical and industrial products.
AerospaceB&D Patterns Ltd - UK
B&D Patterns is a market leader in rigid and flexible pipe assemblies and components for prestigious aerospace customers such as Rolls Royce, Messier Dowty and Meggitt.
Sigma Precision Components Ltd - UK and China
Sigma Precision Components manufacture precision prismatic components for the aerospace industry from their purpose-built facility in Chengdu, China. With offices in the UK and China, the company offers a range of services to the global aerospace market.
CH Precision Finishers Ltd - UK
C&H provides final polishing and specialist finishing on aeroengine turbine blades, compressor blades and vanes for the power generation industries. Operating from two strategically located centres to offer a local service to the UK aerospace industry.
Energy and Medical
Stainless Metalcraft (Chatteris) Ltd - UK
Provider of safety-critical equipment for the energy, medical, science and research communities, worldwide, specialising in precision pressure and vacuum vessels and associated sub-assemblies and systems.
Crown UK Ltd - UK
Design and manufacture leading pole and support fabrication units, known as the `Crown Pole' for roadside safety cameras, rail track signalling, gantries and roadside signage poles.
Industrial products
Jenaer Gewindetechnik GmbH - Germany
Design and manufacture precision ballscrews and related products from plant in Jena, Germany. Ballscrews are critical in the running and precise movement of (CNC) computer controlled machine tools and precision instrumentation.
Jena Rotary Technology Ltd - UK
Market Jena product range of precision ballscrews. Operate fast service repair for UK ballscrew users. Design and manufacture (B&T) Boneham & Turner range of spindles. UK sales and service for GMN (Spindles) and a range of other OEMs
Jena-Tec Inc - USA
Sales and support operation for the Jena-Tec product range throughout North America
Chairman's Statement
The last 12 months have proven to be a near perfect storm for engineering businesses and we have suffered in common with many others. We have had a disappointing first half to the year, as the protracted downturn in global manufacturing markets continued and affected every major sector that we compete in. As a result, cost cutting and efficiency improvement activities have continued apace.
With first half turnover down by 23% versus last year, it has been difficult tostrike the balance between short term profit maintenance and longer termbusiness health. We believe that we have balanced this equation to the best ofour abilities and left the Group in a strong position to take advantage of therecovery, as it emerges.This first half of this year marked the nadir in our fortunes. Our order bookis gradually recovering now, though at a slower pace than we had hoped andbudgeted for when we set out our original plans. Pleasingly, our strategy ofbuilding market-leading, niche positions in our defined market sectors isintact and we can point to a number of key contract wins as evidence that weare steering the right course through current adverse market conditions. Asexamples, our €4m contract in Aerospace for specialist self-locking nuts, our £8m pending contract with Cummins for generator frames and our initial £0.5mcontract for safety-critical actuator systems with a major European utilitycompany give us confidence in our actions.The weakness in the first half was more marked than expected, however, and wetherefore are unlikely to meet the original market expectations for the year,even though we expect improved performance in the second half. We remain veryguardedly optimistic about our prospects throughout the downturn, with asignificant pipeline of opportunities beginning to be realised, albeit muchmore slowly than we previously envisaged.We have taken decisive actions in the last few months to maintain the businesson something of an even keel and remain focused on improving returns forshareholders. As we continue to execute our strategy, this will enable us todeliver strong value growth in future and we believe that our relationshipswith key blue chip customers will bring us through the current turbulent cyclepoised for a future of growth in attractive global markets.Our people have performed very well indeed in the most trying and difficult ofcircumstances and we thank them, as ever, for their continuing hard work anddedication in bringing us through this once-in-a-lifetime downturn.Roger McDowellChairman10 February 2010Business ReviewGroup PerformanceTurnover:
As previously anticipated, first half turnover was severely impacted by theon-going slowdown in world engineering markets, declining to £13.5m (2009:17.5m). It is important to note that we have not lost any major contracts orcustomers in the period. All three divisions experienced turnover falls, withthe most significant being at Energy and Medical, where new business forMetalcraft and Crown has not kicked-in fast enough to prevent a very poor firsthalf. This was driven by weak order intake, though this is now improving in
alldivisions.Profit:
Despite aggressive cost cutting, we were unable to prevent a slide in grossmargins, down in the first half to 23% (2009: 28%). The margin reduction waspartly down to lower sales causing relative inefficiencies and partly a salesmix effect. Operating profit (after share based payments and amortisation) wascorrespondingly down, at £208k (2009: £885k). As last year, our first half /second half split is strongly skewed, though by a number of projects, ratherthan just one. The split is driven by the weak order intake in the first half.
Earnings per Share (EPS):
Adjusted diluted earnings per share for the period ending 30th November 2009was 1.2 pence per share (2009: 2.1 pence per share) based on weighted averagenumber of shares of 25,517,268 (2009: 18,518,072).
Funding and Liquidity:
The net cashflow from operations was £2,626k (2009: £1,892k). A credible result, given the reduction in turnover experienced in the first half.
Net indebtedness at 30 November 2009 stood at £8.5m, £1.6m lower than at the year end. Balance sheet gearing was 37%, down from 48% at 31 May 2009.
Dividend:
The Board believes it is still prudent to preserve cash in the business at thistime and, consequently, recommends that no dividend should be paid in respectof the half year (2009: Nil pence). Looking forward, the Board will keep theyear end dividend under review, taking account of the on-going gradualimprovements in trading positions in our markets.
Operations
Aerospace Division
As widely reported, the aerospace market has suffered significant declines involume with the reductions in global passenger traffic causing consequentreductions in new aircraft orders and, in turn, this has rippled through thesupply chain for aerospace components. Despite this, we are cautiouslyoptimistic about our aerospace prospects, given some important wins in theperiod and the on-going development of strategic relationships with our majorOEM accounts. Maiden flights by the Boeing 787 and A400M were also a welcomeboost to the market, though there is no significant impact on our orderposition in the near term.B&D Patterns has seen a reduction in business in the period due to prevailingmarket trends, but is winning plaudits from key customers for continuousquality improvements. This has led to customers placing new business with us,including: new orders from Eaton worth £0.5m per annum; long term agreementdiscussions with Meggitt; and, recently, a new €4m four year contract forself-locking nuts with a major European aerospace OEM. Volume deliveries forthis latter contract will start in the new financial year, after a suitablequalification period. Other important pieces of new business are underdiscussion and we would expect to secure these for commencement of deliveriesin the new financial year also.Significant cost cutting at B&D has seen the headcount reduced by 30% in thelast 12 months in response to demand reductions. This has helped to keep thebusiness on an even keel during this turbulent interlude and we expect to reapthe benefit from this leaner operation, as the demand increases again with neworder intake.
The successful conclusion of the warranty claim with the former owners of B&D saw the return of £932k of cash to the business after costs.
Sigma in China has made a significant breakthrough by recording its firstquarterly profit in the second quarter of our financial year, following amodest loss in the first quarter. The improved performance was on the back ofincreases in output driven by efficiency gains, as the business continues toprogress up a steep learning curve. Further gradual capital investment isadding to capacity, providing us with the stable platform we need to build onthis beneficial result.Whilst orders were also delayed at Sigma, a new Long Term Agreement (worth £1m)was signed with Moog in the period, locking in this business stream and wecompleted in depth audits with a number of aerospace OEMs looking topotentially secure capacity from us in future. In particular, Meggitt have nowapproved Sigma for long term component supply. We were very pleased that Sigmawas recognised by winning the Cathay Pacific Rising Stars Award, underliningthe nature of the achievement in setting up this fully fledged aerospace supplybusiness in China.
C&H, like B&D, has seen demand softening that has resulted in headcount reductions of over 25% from the peak. As a more labour intensive business, C&H is easier to scale up and down in this respect and recent extensions to business with a major UK aerospace customer (worth an estimated £0.5m per annum) have meant that we are now hiring new people again in this business.
The maturing C&H Cheltenham facility is running smoothly, albeit on reduced volumes of undercarriage components from Messier Dowty and its other supply chain partners.
Energy and Medical Division
Trading conditions for Metalcraft were particularly tough in the first half ofthis year. As expected, there were reductions in a number of the market sectorswithin which Metalcraft operates. What was unexpected was the time taken tobegin to see a reversal of these reductions and the fruition of the work todevelop new sectors - eg Power Generation and Nuclear.The long awaited contract with Cummins (Power Generation) is being finalised atpresent, though modest initial deliveries of test batches commenced in November2009. This contract is worth an estimated £8m to Avingtrans over its three yearterm and is expected to grow in subsequent years, subject to recovery of theCummins market for pre-integrated power systems. This is very welcome news, butit is several months later than planned and the ramp up has been slower thanexpected.In the Nuclear Decommissioning sector, we are pleased to have been chosen as avessel supplier by Costain and have thus far garnered contracts to the value of£0.6m this year. We have also secured vessel supply contracts from DoosanBabcock for use in nuclear decommissioning at Sellafield.In addition, AREVA have now qualified Metalcraft as a supplier for nuclear newbuild components. This is an important potential development for us, as AREVAplans to site new reactors at Hinckley Point in Somerset and Sizewell inSuffolk. Whilst the reactors will not be operational until 2018, the relevantequipment and vessels will commence manufacture in the supply chain in 2011.From an order trend point of view, there was no repeat so far of the largescale (£4m) order for Exterran that we completed in the second half of lastyear, though we are working on a smaller order for them at present and possiblefurther orders are in the pipeline.
We are delighted to announce that funding from a number of sources has been approved for Metalcraft to develop a technical training school for the local Fenland area which will be located on the Metalcraft site and will commence operations in September 2010.
Crown received the first material order for its new variable motorway signagepole (VMC) from Balfour Beatty, worth £1.25m. Crown therefore expects apositive second half performance from the commencement of deliveries of the VMCto Balfour Beatty for the Welsh Assembly Government's M4 upgrade. One of thenew designs has been included in the tender for the UK Managed Motorway Scheme,which is due for award in 2010.
Orders at Crown have been further supported by OEM call off of the new SmartPoleTM for roadside safety cameras.
Industrial Products Division
As foreseen, the Jena Tec businesses had a weak first half, with turnover down39% versus the first half of last year. Given the late cycle nature of theglobal industrial markets this business serves, the pattern of reduction hasbeen largely as anticipated and we took early steps to reduce costs in thebusiness (Jena's main competitors saw similar or greater market reductions).
In particular, we moved our German subsidiary on to part time working early in the new financial year, with most departments reducing their activity level down to 50%. We have taken full advantage of German government financial support to sustain the business through this lean period.
Global purchasing manager's indices in key industrial markets - notably Germanyand the USA - have seen a slow but sustained recovery, matched by improvingorders for the Jena Tec businesses and we believe that this gradual recoverywill continue into the second half.Importantly for future growth, Jena Tec received first orders for a safetycritical actuation system upgrade from a major European utility company forinstallation in a UK facility. This first upgrade will be worth just under £0.5m to us and should be followed by further orders in the next financial yearonce successful operation of the system is proven.Our investments in capacity for miniature ballscrew production for medicalapplications have begun to bear fruit in the development of a new OEM accountin this sector. The work done over the last eighteen months to develop ourAsian market is also showing encouraging signs, with growing accounts in China,India and Korea, amongst others.
Despite a severe downturn in its sector, Jena Tec will progress its growth plans through delivery of higher value added automated systems, niche applications and bespoke precision products and believes it is sufficiently prepared to buck the trend and capitalise on opportunities as the global market emerges from recession.
OutlookThe global downturn in engineering has turned out to be worse than weanticipated and no-one can be certain that a "double-dip" will not adverselyaffect us in the months to come. Nonetheless, our prompt cost control haslimited the damage thus far. Our clear strategic positioning, coupled with ourstrong focus on customer service and quality has maintained or strengthened ourkey OEM relationships and brought important new customers to us.Despite our best efforts, this year is going to be short of the original marketexpectations due to the weak first half. We expect that the situation in thesecond half will improve and return to something closer to normality, assumingthat the double-dip scenario does not emerge. Looking further forward, we arecautiously optimistic about the next financial year, given the new contractwins that we have already secured and further prospects in the pipeline.
Overall, Avingtrans remains well placed to benefit from structural changes in our markets and to grow again as global industrial markets recover.
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Finance Director
10 February 2010 10 February 2010 10 February 2010
Consolidated Income Statement (Unaudited)
for the six months ended 30 November 2009
6 months to 6 months to Year to 30 Nov 30 Nov 31 May 2009 2008 2009 £'000 £'000 £'000 Revenue 13,453 17,527 37,559 Cost of sales (10,417) (12,587) (27,427) Gross profit 3,036 4,940 10,132 Distribution costs (414) (479) (955) Administrative expenses (3,201) (3,565) (6,635) Share based payment expense (8) (18) 88 Amortisation of intangibles from business (69) (69) (137)combinations Restructuring costs (145) (11) (71) Warranty claim 932 - - Operating profit 131 798 2,422 Finance income - - 2 Finance costs (192) (381) (595) (Loss)/profit before taxation (61) 417 1,829 Taxation (Note 3) 288 (475) (701) Profit/(loss) for the financial period 227 (58) 1,128
Earnings/(loss)/earnings per share :
From continuing operations - Basic 0.9p (0.2)p 5.1p - Diluted 0.9p (0.2)p 5.1p
All the above results are from continuing operations
Consolidated statement of comprehensive income (Unaudited)
for the six months ended 30 November 2009
6 months to 6 months to Year to 30 Nov 30 Nov 31 May 2009 2008 2009 £'000 £'000 £'000 Profit/(loss) for the period 227 (58) 1,128
Exchange differences on translation of 41 240 338
foreign operations
Total comprehensive income for the period 268 182 1,466
Consolidated cash flow statement (Unaudited)
for the six months ended 30 November 2009
6 months to 6 months to Year to 30 Nov 30 Nov 31 May 2009 2008 2009 £'000 £'000 £'000
Net cash inflow/(outflow) from 2,574 1,476 (386)
operating activities Investing activities Interest received - - 2
Purchase of intangible assets (188) (90) (420) Purchase of property, plant and (540) (1,178) (2,022) equipment
Proceeds from sale of property, 18 15 19
plant and equipment Net cash used in investing (710) (1,253) (2,421) activities Financing activities Dividends paid - (132) (132) Repayments of borrowings (333) (302) (642) Repayments of obligations under (668) (545) (1,103) finance leases
Proceeds from issue of ordinary - 3,358 3,654
shares Borrowings raised 363 469 1,271 Net cash (outflow)/inflow from (638) 2,848 (3,048) financing activities
Net increase in cash and cash 1,226 3,071 241
equivalents Cash and cash equivalents at (2,255) (2,534) (2,534) beginning of period
Effect of foreign exchange rate (52) (89) 38
changes Cash and cash equivalents at end of (1,081) 448 (2,255) period
Cash generated from operating activities:
for the six months ended 30 November 2009
6 months to 6 months to Year to 30 Nov 30 Nov 31 May 2009 2008 2009 £'000 £'000 £'000 Profit/(loss) for the period 227 (58) 1,128 Adjustments for: Finance costs 192 381 593 Taxation (288) 475 701
Depreciation of property, plant and 736 706 1,434
equipment
Amortisation of intangible assets 148 92 264 (Gain) on disposal of property, plant (8) (11) (9)
and equipment Share based payment expense 8 18 (88)
Operating cashflow before movements 1,015 1,603 4,023
in working capital
Decrease/(increase) in inventories 305 (1,978) (255) Decrease/(increase) in trade and 3,025 (515) (1,845) other receivables (Decrease)/increase in trade and (1,726) 2,773 (1,584) other payables Other non cash charges 7 9 17 Cash generated by operations 2,626 1,892 356 Income taxes received/(paid) 140 (34) (145) Interest paid (192) (382) (597) Net cash inflow/(outflow)from 2,574 1476 (386) operating activities
Summarised consolidated balance sheet (Unaudited)
at 30 November 2009 30 Nov 30 Nov 31 May 2009 2008 2009 £'000 £'000 £'000 Non current assets Goodwill 10,242 10,242 10,242 Other intangible assets 1,982 1,817 1,941 Property, plant and equipment 11,210 10,991 11,308 Deferred tax 38 24 38 Investments 219 219 219 23,691 23,293 23,748 Current assets Inventories 6,706 8,636 6,952 Trade and other receivables 5,927 7,557 8,914 Current tax asset 242 119 321 Cash and bank balances 1,001 2,533 634 13,876 18,845 16,821 Total assets 37,567 42,138 40,569 Current liabilities Trade and other payables (4,686) (9,910) (6,323) Obligations under finance leases (1,312) (926) (1,247) Borrowings (2,736) (2,585) (3,543) Current tax liabilities (561) (492) (759) Total current liabilities (9,295) (13,913) (11,872) Non-current liabilities Borrowings (3,938) (4,749) (4,264) Obligations under finance leases (1,420) (1,762) (1,729) Deferred tax (1,416) (1,370) (1,436) Deferred consideration (154) (750) (200) Total non-current liabilities (6,928) (8,631) (7,629) Total liabilities (16,223) (22,544) (19,501) Net assets 21,344 19,594 21,068 Equity Share capital 1,274 1,232 1,274 Share premium account 9,534 9,280 9,534 Capital redemption reserve 814 814 814 Merger reserve 402 402 402 Translation reserve 677 538 636 Other reserves 180 180 180 Retained earnings 8,463 7,148 8,228 Equity attributable to owners of 21,344 19,594 21,068 the Company
Consolidated statement of changes in equity (Unaudited)
at 30 November 2009
Share Share Capital Merger Trans- Other Retained Total Capital premium redemp- reserve lation reserves earnings Account account tion reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 June 2008 882 6,272 814 402 298 180 7,320 16,168 Loss for the - - - - - - (58) (58) period Dividends paid - - - - - - (132) (132) Exchange rate - - - - 240 - - 240 gain Share-based - - - - - - 18 18 Payments New share issue 350 3,150 - - - - - 3,500 Costs of share - (142) - - - - - (142) issue At 30 Nov 2008 1,232 9,280 814 402 538 180 7,148 19,594 Profit for the - - - - - - 1,186 1,186 period Exchange rate - - - - 98 - - 98 gain Share-based - - - - - - (106) (106) Payments New share issue 42 255 - - - - - 297 Costs of share - (1) - - - - - (1) issue At 31 May 2009 1,274 9,534 814 402 636 180 8,228 21,068 Profit for the - - - - - - 227 227 period Exchange rate - - - - 41 - - 41 gain Share-based - - - - - - 8 8 payments At 31 May 2009 1,274 9,534 814 402 677 180 8,463 21,344
Notes to the half year statement
30 November 2009
1. Basis of preparation
The Group's interim results for the six month period ended 30 November 2009 areprepared in accordance with the Group's accounting policies which are based onthe recognition and measurement principles of International Financial ReportingStandards (`IFRS') as adopted by the EU and effective, or expected to beadopted and effective, at 31 May 2010. As permitted, this interim report hasbeen prepared in accordance with the AIM rules and not in accordance with IAS34`Interim financial reporting'.
These interim results do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. The unaudited interim financial statements were approved by the Board of Directors on 9 February 2010 and will shortly be available on the Group's website at http://www.avingtrans.plc.uk/pages/reports.html.
The consolidated financial statements are prepared under the historical costconvention as modified to include the revaluation of financial instruments. Theaccounting policies used in the interim financial statements are consistentwith IFRS and those which will be adopted in the preparation of the Group'sannual report and financial statements for the year ended 31 May 2010. Thestatutory accounts for the year ended 31 May 2009, which were prepared underIFRS, have been filed with the Registrar of Companies. These statutory accountscarried an unqualified Auditors' Report and did not contain a statement undereither Section 498 of the Companies Act 2006.2. Segmental analysis Aerospace Energy and Industrial Unallocated Total Medical Products Central items £'000 £'000 £'000 £'000 £'000 6 months ended 30 Nov 2009 Revenue 4,859 5,758 2,836 - 13,453 Operating profit/ 4 (294) (283) 704 131(loss) Year ended 31 May 2009 Revenue 10,716 17,509 9,334 - 37,559 Operating (loss)/ (73) 1,583 1,051 (139) 2,422profit 6 months ended 30 Nov 2008 Revenue 5,576 7,342 4,609 - 17,527 Operating profit/ 3 315 617 (137) 798(loss) 3. Taxation
The taxation credit/(charge) is based upon the expected rate for the year ended 31 May 2010.
4. Earnings/(loss) per share
Basic earnings per share is based on the earnings 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 EMI share options.
6 months to 6 months to Year to 30 Nov 2009 30 Nov 2008 31 May 2009 No No No Weighted average number of 25,480,577 18,493,591 21,933,317 shares - basic Share Option adjustment 36,691 24,481 6,961 Weighted average number of 25,517,268 18,518,072 21,940,278 shares - diluted £'000 £'000 £'000
Earnings/(loss) attributable to 227 (58) 1,127
shareholders Share based payments 8 18 (88) Amortisation of intangibles 69 69 137
Deferred tax charge re abolition - 367 383
of UK IBA's Sigma deferred consideration - - (201) release
Adjusted earnings attributable 304 396 1,358
to shareholders Basic earnings per share 0.9p (0.2)p 5.1p Diluted earnings per share 0.9p (0.2)p 5.1p Adjusted basic earnings per 1.2p 2.1p 6.2pshare
Adjusted diluted earnings per 1.2p 2.1p
6.2pshare The Directors believe that the above adjusted earnings per share calculation isa more appropriate reflection of the Group performance. Owing to the lossreported in the 6 months ended 30 November 2008 the share options and warrantsare not dilutive.
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