Avingtrans Regulatory News (AVG)

24 November 2014

Avingtrans Plc

("Avingtrans" or the "Company" or the "Group")

Trading Update

Avingtrans plc (AIM:AVG), which designs, manufactures and supplies critical components and associated services to the global aerospace, energy, and medical sectors, provides the following update on trading and guidance for the full year.

Aerospace

While the market for our aerospace products and services remains buoyant, including increased activity with several existing and prospective aerospace customers, significant restructuring by one of the Company's key customers is affecting short term demand in our Aerospace Division.

In response, the Board has decided to broaden the Group's site rationalisation plans, which will deliver greater production efficiency and cost improvements to Sigma Components. This extensive programme involves the closure and merging of our Derby site into Swadlincote (formerly RMDG) and the reorganisation of Buckingham Composites. Farnborough will concentrate on complex fabrications, while our Hinckley rigid pipe centre of excellence will further rationalise machining, resulting in an increased role for Sigma Chengdu. 

Energy and Medical

At the time we announced our full year results at the start of October, we noted the sizable task remaining to integrate Maloney and Metalcraft. The steep decline in the oil price - and the resulting delays in a number of project decisions - has presented the Group with the need to implement an accelerated cost reduction program across the Energy and Medical division.

This will involve the closure and sale of the Maloney Aldridge site, which is already in progress. Following the resulting transfer of the design and engineering activities to new offices, manufacturing will be transitioned to an outsourced global supply chain, both lowering cost and improving logistics. This will be supported by the larger Metalcraft facility in Chatteris.

In the Medical business, the rate of production in China remains low, but demand from Siemens has stabilised and the slow ramp-up in their activity continues. The Group is also seeing increased activity with other medical market prospects.

Finally, Crown International is seeing a steady recovery in its market and has secured recent contract wins worth in excess of £2m.

Outlook

The Group is a niche engineering market leader in the Aerospace, Energy and Medical sectors. We have attractive structural growth markets and durable customer relationships and, despite these short term challenges, we believe that the prospects for the Group are exciting.

However, as a consequence of these short term issues, the Board now expects Group revenue and profitability in respect of the current financial year to be similar to that reported for FY14, excluding the revenue and initial losses from the RMDG acquisition. The steps set out above will improve operational efficiency and we expect the full year impact of these actions to be approximately £0.6m, the full benefit of which will be reflected in FY16.

Notwithstanding our revised expectations, it is anticipated that the Board will maintain a progressive dividend in respect of the current financial year, reflecting our confidence in the overall prospects for the Group.

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