Source - RNS
RNS Number : 8753K
Avingtrans PLC
27 September 2016
 

Avingtrans plc

("Avingtrans" or the "Group")

 

Preliminary Results for the year ended 31 May 2016        

 

Avingtrans plc, which designs, manufactures and supplies critical components, modules and associated services to the energy, medical and industrial sectors, today announces its preliminary results for the twelve months ended 31 May 2016.

 

Financial Highlights

 

·     Aerospace division sold for an enterprise value of £65.0m, just prior to year end

·     Revenue from continuing operations decreased by 6% to £21.2m (2015: £22.6m)

·     Adjusted EBITDA from continuing operations increased by 18%, to £0.4m (2015: £0.3m)

·     Adjusted Profit Before Tax improved to £0.1m (loss 2015: £0.7m)

·     Adjusted Diluted earnings per share from continuing operations 1.0p (loss 2015: (0.4p))

·     Cash generated from operating activities £7.8m (2015: £1.6m)

·     Continued investment in capability and capacity in continuing operations : £0.5m (2015: £0.8m)

·     Net Cash increased to £51.0m (31 May 2015: Net debt £5.9m)

·     Increased final dividend of 2.1p per share, Full year total 3.2p (2015: Final 2.0p, Total 3.0p)

·     Tender offer of £28 million to be announced shortly, expected to be completed during November 2016

 

Operational Highlights

 

·     Energy and Medical division revenues flat, constrained by low oil price, EBIT recovered in H2

·     Aldridge building sold for £1.1m net proceeds

·     Modest full year operating profit of £0.1m (loss 2015: £0.7m) achieved by focus on cost controls

·     Significant pre-production progress achieved for Sellafield 3M3 box contract

·     New contract wins with Rapiscan and Bruker, each worth £3m over 3 years

·     Post year end, Maloney won a contract with EDF, worth £3.5m over 3 years

·     Crown's markets were stable and the business remains profitable

 

Commenting on the results, Roger McDowell, Chairman, said:

"This was an exceptional year for Avingtrans. The group sold its Aerospace division for an enterprise value of £65m with the intention to return £28m of the disposal proceeds to shareholders through a tender offer, which we will announce shortly. Plans are advancing positively on the expected utilisation of the remaining funds, both organically and via acquisition. The Energy and Medical division performed in line with management expectations in the period and we look forward to the year ahead, as we prepare to capitalise on the major contract wins with Sellafield, Rapiscan, Bruker and EDF."

"With attractive structural growth markets and durable customer relationships, we remain cautiously confident about the future of Avingtrans."

 

Enquiries:

 

Avingtrans plc

01354 692391

Roger McDowell, Chairman

Steve McQuillan, Chief Executive Officer

Stephen King, Chief Financial Officer

Numis

020 7260 1000

Richard Thomas (Corporate Finance and Nominated Adviser)

Tom Ballard (Corporate Broking)

Newgate (Financial PR)

020 7653 9850

Adam Lloyd

Ed Treadwell

 

About Avingtrans plc:

Avingtrans is engaged in the provision of highly engineered components, systems and services to the energy, medical and traffic management industries worldwide.

 

Energy and Medical

 

Stainless Metalcraft Ltd - Chatteris, UK and Chengdu, China

Provider of safety-critical equipment for the energy, medical, science and research communities, worldwide, specialising in precision pressure and vacuum vessels and associated fabrications, sub-assemblies and systems.

 

Maloney Metalcraft Ltd - Aldridge, UK

Designs, manufactures and services oil and gas extraction and processing equipment, including process plant for dehydration, sweetening, drying and compression.

 

Crown International  Ltd - Portishead, UK

Designs and manufactures market-leading pole and support systems for roadside signage and safety cameras, rail track signalling and gantries.

 

Composite Products Ltd - Buckingham, UK

Centre for composite technology, parts and assemblies, serving customers in industrial markets.

 

 

 

 

Chairman's Statement

The last twelve months have been a year of momentous change for the group. Results for the year are dominated by the sale of our Aerospace division, close to our financial year end for an enterprise value of £65 million which, after adjustment for debt and working capital and associated transaction costs, resulted in the Company receiving  proceeds of approximately £52 million (before escrow arrangements).

 

This transaction was a consequence of a strategic review of the Avingtrans group and its prospects during 2015. This review involved the Board and the Divisional Managing Directors, as well as external advisors. It resulted in four key concepts and outcomes:

 

1.      Avingtrans has a successful track record of growing businesses from start-up, developing them internationally, and crystallising value through their sale at an appropriate stage in their development, as demonstrated by the successful sale of JenaTec in 2012.

 

2.      Following the successful conclusion of the acquisition of the Rolls-Royce pipe business (completed in March 2016, but already under discussion in 2015), the Board felt that it had achieved the majority of the targets which it had set for the Aerospace Division and it was the right stage in its development to consider a disposal of the business.

 

3.      Subject to achieving an attractive valuation for the Aerospace Business, the Board believed that shareholder value would be maximised over the mid to long term by disposing of the Aerospace Division and returning part of the proceeds from the disposal to shareholders, with the Company also reinvesting part of the proceeds into strengthening the Group's position in the Energy sector in particular and potentially other high value engineering sectors.

 

4.      The Board believes that the successful contract win by the Energy and Medical business with Sellafield in May 2015 (of the initial tranche of 3M3 nuclear waste disposal containers) demonstrated the significant business opportunities available in this market, if the Group were able to put more resource into this sector.

 

Over the last few years, the group grew the Aerospace Division to become an international leader in its chosen niche markets. This development was underpinned by a number of synergistic acquisitions, which enabled the Aerospace Division to build a strong brand and market position and to produce improved performance. Thus, the group has realised significant value for shareholders through the disposal, at a considerable premium to the cost of the original component parts. The transaction followed a concentrated sale process, which produced a number of bids, from a select group of relevant industry and financial suitors from the UK, Europe, the USA and Asia

 

Meanwhile, the Energy and Medical division has made steady progress in its recovery from the oil and gas sector downturn. During the year, we sold the freehold of the Maloney Metalcraft building at Aldridge for £1.1m, net of costs, limiting our exposure to a continuingly depressed oil and gas market. Pre-production activities commenced on the £47m, ten year contract with Sellafield, for the provision of 3M3 (three-metre-cubed) nuclear waste boxes, albeit that we have seen some changes to phasing of the production start-up. Metalcraft is well-placed to be a key partner for Sellafield in this programme over the next 30 years. We were also very pleased to win two £3m contracts with Bruker and Rapiscan, both of which marked important developments in the diversification of the Energy and Medical division and improved the prospects for the Chengdu and Buckingham units.

 

During the year, we continued to invest in skills and completed our investments in new IT systems, as part of an on-going journey towards world-class manufacturing capability.

 

We are now in a period of transition for the group, where we will return £28 million to shareholders and use the remaining c£20 million of cash to bolster our Energy and Medical division's organic growth prospects and to proactively seek new opportunities to build shareholder value through acquisitions. Despite the economic uncertainty following the Brexit vote, we're not under any pressure to buy and it is a good time to have cash.

 

In addition to the cash to be returned to shareholders, the Board has declared an increased final dividend, of 2.1 pence per share, rendering a full year total of 3.2 pence, once again underlining our commitment to consistently improve returns to our shareholders.

 

Finally, I would like to take this opportunity to thank all of our employees, past and present, for their hard work and dedication to deliver excellent quality engineering products and services to our customers.

 

 

 

Roger McDowell

Chairman

26 September 2016

 

 

 

Strategic Review

Group Performance

 

Strategy

We are a precision engineering group, operating in differentiated, specialist niches in the supply chains of many of the world's best known engineering original equipment manufacturers. Our core strategy is to build market-leading niche positions in our chosen market sectors - currently Energy and Medical. Over the longer term, our acquisition strategy has enabled our businesses to develop the critical mass necessary to achieve market leadership.

 

Our core businesses have the capability to engineer products in Europe and produce those products partly, or wholly in Asia, allowing us and our customers to access low cost sourcing at minimum risk, as well as positioning us neatly in the development of the Chinese and Asian markets for our products. Metalcraft is well established in China, providing integrated supply chain options for our customers.

 

The strategy of the group, is to "buy and build" in regulated engineering niche markets, where we can see potential consolidation opportunities, which can lead to significantly increased shareholder returns over the medium to long term. We will then crystallise the gains with periodic sales of businesses at advantageous times, enabling us to return the proceeds to shareholders. The Sigma deal and its precursor acquisitions clearly showed that we can build strong brands and value from smaller constituent parts - we have also demonstrated well-developed deal-making skills and shown that we do not overpay for assets.

 

Niche Market Positioning

Aerospace: Sigma achieved leadership in civil aerospace pipes and ducts and in the domain of aerospace component polishing and finishing. This allowed us to sell Sigma for well over 2x the original shareholder equity invested in its development. With the disposal of Sigma, Avingtrans has exited the Aerospace market.

 

Energy and Medical: We are developing our position as a leading European supplier of energy industry process modules, vertically integrating this capability with the vessel manufacturing capability at Metalcraft. This same vertical integration capability lends itself to the nuclear decommissioning, life extension and "new nuclear" markets, as well as a variety of other niches in the renewable energy sector.

 

Metalcraft's cryogenic vessel manufacturing pedigree, spanning over 40 years, makes us a supplier of choice to OEMs in markets where this capability is critical; notably in magnetic resonance imaging, nuclear magnetic resonance and related sectors. We enjoy a global market leading position in this particular supply niche.

 

We have strengthened our capability to manage sophisticated outsourced manufacturing programmes for our customers, thus accessing business of enduring value, with the prospect of further sales growth. We remain focused on markets where we can sustain a significant competitive, long term advantage and where the regulatory and technical requirements provide competitive barriers to entry.

 

Thus, a "buy and build" around smaller deals, to consolidate a niche is again possible, as we demonstrated with Sigma. Having built successful Avingtrans businesses in Germany, the USA and China, as well as the UK, our M&A prospects are not confined to the domestic market.

 

 

Operations

 

Energy and Medical Division (Metalcraft, Maloney Metalcraft, Composite Products and Crown)

 

Operational Key Performance Indicators (KPIs)

 


2016

2015

·    Customer Quality - defect free deliveries (%)

99.3

99.3

·    Customer on time in-full deliveries (%)

97.0

97.0

·    Annualised staff turnover (%)

8.9

5.7

·    Health, Safety and Environment incidents per head per annum

0.05

0.1

 

 

The excellent divisional quality and delivery performance were sustained in the year. For some key customers, we were pleased to be able to record near perfect quality and delivery records across the full 12 months. Staff turnover - allowing for oil and gas market turmoil - is at an acceptable level for this type of business. Health and safety incidents continued their welcome significant improvement of recent years.

 

 

Operations (continued)

Energy and Medical Division (Metalcraft, Maloney Metalcraft, Composite Products and Crown) (continued)

 

The low oil price continued throughout the year, sapping any momentum in potential prospects for this sector. As previously noted, our response was swift and we took action to downsize the Maloney business and exit the Aldridge manufacturing site. The sale of the building was completed in our first half and we achieved a sale price for the freehold of £1.1m, net of costs. The subsequent sector woes fully justified our decisions. We have also countered the negative effects of the oil price, by focusing on the growth areas in the energy market, for example: energy storage; carbon capture; and nuclear power life extension and decommissioning.

 

The remaining effects of the oil price reduction mostly worked through Maloney in the period. Whilst this suppressed the revenue (-6%), we were satisfied that our early, decisive actions prevented further damage. Indeed, including the sale of the Maloney building, the division did make a healthy profit, but this one-off effect has been stripped out, such that the underlying performance was a very modest profit for the year.

 

Despite the current oil price issues, global power consumption is expected to grow at a Compound Annual Growth Rate of over 4% to 2025. This is positive for Metalcraft and Maloney, since we have interests in various parts of the energy cycle, from primary extraction, to generation, to alternative energy storage, to decommissioning. The demographics of a growing and ageing world population are encouraging for the medical imaging and diagnostics markets, so the division is well placed to benefit from external market drivers.

 

Summarising developments over the year at the Energy and Medical sites:

 

·    Metalcraft, Chatteris: business with Siemens and Cummins in the UK was again steady. Site delivery and quality consistency were further improved. The £47m /10 year contract with Sellafield Ltd, to produce 3M3 (three-metre-cubed) boxes, for the storage of intermediate level nuclear waste, is now underway. Whilst progress has been somewhat slower than anticipated, the delays are not material for the project overall and we have made good progress with site preparations and pre-production tests. The production set-up and prototype testing will continue in the current financial year, with series production expected to commence in our next financial year. Metalcraft is well-placed to be a key partner for Sellafield in this programme, over the next 30 years, during which time the total number of 3M3 boxes required is expected to be up to 70,000 units, according to Sellafield's own estimates.

 

·    Metalcraft, Chengdu: results for the unit improved year on year and we made good progress with the existing customers. The exciting news was the Bruker contract win for Nuclear Magnetic Resonance (NMR) vessels. We have now begun preparations to start production of the Bruker systems in China later in the current financial year.

 

·    Maloney Metalcraft, Aldridge: as noted elsewhere, the oil price effects continued to wash through the business in the period, leading to a loss for this site, excluding the one-off sale of the building. There were some successes - notably the $2 million contract with JGC Gulf International Co. Ltd, to supply gas treatment packages. The sector remains in hibernation and we continue to review remaining costs prudently. Meanwhile, some of the team are being deployed on other contracts - e.g. nuclear. The recent EDF contract win, worth £3.5m, shows that the business has value beyond oil and gas.

 

·    Crown, Portishead: Crown had a steady year in its core business. The Future Environmental Technologies (FET) partnership made pleasing progress in the period, with the first carbon abatement project now running smoothly in Wales. This technology promises to make small to medium diesel generators "clean", which is very important in a future where the energy grid is more fragmented and localised. Other projects with FET are now underway.

 

·    Composites, Buckingham: the retained part of the composites business in Buckingham (now called Composite Products Ltd) also made a loss for the year - as we extracted the aerospace related content to go with Sigma - and due to start-up costs for Rapiscan. By year end, this business was running close to break-even, with improving prospects.

 

Aerospace Division (Sigma)

 

The timing was perfect for us to sell Sigma in the last year and crystallise the optimum shareholder value, having achieved the majority of our deliverable goals with this business, rather than to keep growing for the sake of it. The £65m enterprise value achieved was clearly a good outcome for shareholders, as verified by the comprehensive sale process, resulting in multiple credible bids for Sigma.

 

 

Financial Performance

 

Key Performance Indicators

The Group uses a number of financial key performance indicators to monitor the business, as set out below.

 

Revenue: continuing operations saw modest sales decline - oil and gas effects now washed through

Full year Group revenue of continuing operations was down by 6%, to £21.2m (2015: £22.6m). Energy and Medical again saw year-on-year effects of the oil price holding back revenues, though the base position now seems stable.

 

Profit: improved margins on lower volumes

Adjusted EBITDA increased by 18% (note 2), to £0.4m (2015: £0.3m).  Prompt action to re-size the cost base at Maloney, on-going improvements at Metalcraft and further progress in China improved the overall EBITDA.

 

Gross margins were 14.9% (2015: 10.7%), improving despite adverse conditions.

 

Tax:

The effective rate of taxation was 71.4%, whereas 2015 was 40.8% both a tax credit. The non-taxable sale of the property and ongoing release of deferred tax liabilities distorted the overall tax charge (2015 release of deferred tax at the Maloney site). We have continued to benefit from Research and Development tax credits in the UK. The tax position will "normalise" in the coming years, though we anticipate some on-going benefits - e.g. R&D tax credits and utilisation of China losses.

 

Earnings per Share (EPS): Improved for continuing operations. Substantial benefit from Aerospace disposal

Adjusted diluted earnings per share for continuing operations improved to 1.0p from a loss in 2015 of 0.4p. Diluted earnings per share, attributable to shareholders was 111.4p (2015:6.3p) reflecting the substantial shareholder benefit from the disposal of Aerospace

 

Funding and Liquidity: Balance sheet strong with Net Cash

The net cash inflow from operating activities was £7.8m (2015: £1.6m).

 

Net Cash (note 7) at year end stood at £51.0m (2015: Net indebtedness: £5.9m gearing: 17%) following the disposal of Aerospace just prior to the year end and prior to payment of costs.

 

Dividend: steady progress

The Board again voted to underline our progressive dividend policy - despite the disposal - and we are pleased to be able to recommend an improved final dividend of 2.1 pence per share (2015: 2.0 pence per share). We intend to continue on this progressive path, subject to the outcome of acquisition activities in the coming years. The dividend will be paid on 9 December 2016, to shareholders on the register at 28 October 2016.

Full details of the tender offer will be announced shortly. However, it is expected that shareholders who participate in the tender offer will still receive the final dividend.

 

People

With the sale of Sigma, Mark Johnson, MD of Sigma and his senior team departed from Avingtrans, as part of the disposal. We wish them well with their plans to develop Sigma under new ownership.

 

Good governance dictates that the non-executive directors should be replaced periodically. Jeremy Hamer has decided that the time is now right for him to retire from the Avingtrans Board. Therefore, Jeremy will stand down from the Board at the AGM in November. He will be replaced as Audit Committee Chair by Les Thomas. Jeremy has been a stalwart supporter of the business whose wise counsel has been invaluable in the development of the Group through both good and difficult times. The Board would like to thank Jeremy for his insightful contribution over many years and wish him the very best for the future.

 

There were no other Board or top team management changes in the period, but we continued to reinforce our management team in Energy and Medical. Skills availability remains challenging, but we do not expect to be unduly constrained by any shortages and we continue to invest in skills - e.g. through apprenticeships, notably at our training centre at Chatteris. Indeed, a recent event at Chatteris celebrated the 100th year of apprentice intake for that business - a proud record.

 

 

Outlook

The group is a niche engineering market leader in the Energy, Medical and Industrial sectors. The oil price shock showed that we can cope well with downturns and the successful sale of Sigma shows investors that we can be trusted to produce excellent returns and to deliver the proceeds back to shareholders. We will continue to be hard-nosed about delivering value and we are not afraid to sell and return capital, if the timing is right.

 

Our strategy continues to produce significant new business wins that support our results and provide good visibility of longer term earnings - e.g. the contract with EDF, won recently. We have an excellent customer base which we can build upon and differentiated product niches to exploit. We are now very well placed to benefit from further market consolidation.

 

The Sigma sale underlined our intention to build shareholder value through targeted merger and acquisition activity. Although we cannot state that this will result in any further transactions during the current financial period, we will vigorously pursue further opportunities to enhance long-term value.

 

Metalcraft is a clear leader in its chosen niche markets, providing customers with consistent quality as part of a world class supplier journey. Our remaining Chinese presence is providing a crucial competitive advantage. Investors are asked to endorse our strategy and join us in the next phase of our development.

 

With attractive structural growth markets and durable customer relationships, we remain cautiously confident about the future of Avingtrans. Future acquisition efforts will be conducted rigorously, with an underpinning ethos that any deal should be for the benefit of all stakeholders and should build sustainable long-term value.

 

 

 

Roger McDowell 

Steve McQuillan

Stephen King

Chairman

Chief Executive Officer

Chief Financial Officer

26 September 2016

26 September 2016

26 September 2016

 

 

 

Consolidated Income Statement for the year ended 31 May 2016

 


Note

2016

2015



£'000

£'000





Revenue

1

21,177

22,557





Cost of sales


(18,028)

(20,134)

 

Gross profit


3,149

2,423





Distribution costs


(699)

(792)

Share based payment expense


(21)

(26)

Net proceeds from property disposal


446

-

Restructuring costs


(272)

(195)

Start up costs - China


-

(450)

Other administrative expenses


(2,830)

(2,192)





Total administrative expenses


(2,677)

(2,863)



 

 

Operating loss

1

(227)

(1,232)





Finance income


554

1

Finance costs


(82)

(92)

 

Profit/(loss) before taxation


245

(1,323)

Taxation

3

175

540

Profit/(loss) after taxation from continuing operations


420

(783)

Profit after taxation from discontinued operations

6

30,716

2,554

Profit for the financial year attributable to equity shareholders


31,136

1,771





Earnings per share:




From continuing operations




- Basic

4

1.5p

(2.8)p

- Diluted

4

1.5p

(2.8)p

From continuing and discontinued operations




- Basic

4

112.3p

6.4p

- Diluted

4

111.4p

6.3p





 





Consolidated statement of Comprehensive income

2015


2014


£'000


£'000

Profit for the year

31,136


1,771

Other comprehensive income for the year, net of tax:




Items that may/will subsequently be reclassified to profit or loss




Exchange differences on translation of foreign operations

(283)


395

Exchange differences recycled on disposal of subsidiary undertakings           6

477


-

Total comprehensive income for the year  attributable to equity shareholders

31,330


2,166









 

 

 

 

Consolidated statement of changes in equity at 31 May 2016

 



 

 

 

 

 

Share

 capital

Share

 premium

account

Capital

redemp-

tion

 reserve

Merger

 reserve

Trans-

lation

 reserve

Other

 reserves

Invest-ment in own shares

Retained

 earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











At 1 June 2014

1,379

10,818

814

402

(597)

180

(1,000)

20,659

32,655

Ordinary shares issued

6

55

-

-

-

-

-

-

61

Dividends paid

-

-

-

-

-

-

-

(740)

(740)

Share-based payments

-

-

-

-

-

-

-

43

43

Transactions with owners

6

55

-

-

-

-

-

(697)

(636)











Profit for the year

-

-

-

-

-

-

-

1,771

1,771











Other comprehensive income










Exchange loss

-

-

-

-

395

-

-

-

395

Total comprehensive income for the year

-

-

-

-

395

-

-

1,771

2,166

Balance at 31 May 2015

1,385

10,873

814

402

(202)

180

(1,000)

21,733

34,185





















At 1 June 2015

1,385

10,873

814

402

(202)

180

(1,000)

21,733

34,185

Ordinary shares issued

2

30

-

-

-

-

-

-

32

Dividends paid

-

-

-

-

-

-

-

(830)

(830)

Transfer on disposal

-

-

-

(402)

-

-

-

402

-

Share-based payments

-

-

-

-

-

-

-

36

36

Transactions with owners

2

30

-

(402)

-

-

-

(392)

(762)











Profit for the year

-

-

-

-

-

-

-

31,136

31,136











Other comprehensive income










Exchange gain

-

-

-

-

(283)

-

-

-

(283)

Recycled on disposal of subsidiary undertakings

-

-

-

-

477

-

-

-

477

Total comprehensive income for the year

-

-

-

-

194

-

-

31,136

31,130

Balance at 31 May 2016

1,387

10,903

814

-

(8)

180

(1,000)

52,477

64,753

 

 

 

Consolidated Balance Sheet at 31 May 2016






2016

2015



£'000

£'000

Non current assets




Goodwill


4,550

9,557

Other intangible assets


930

3,442

Property, plant and equipment


4,668

11,861

Deferred tax


6

64

Available for sale financial assets


-

-



10,154

24,924

Current assets




Inventories


3,046

10,733

Trade and other receivables : amounts falling due within one year


6,141

19,030

Trade and other receivables : amounts falling due after one year


1,450

-

Current tax asset


85

277

Cash and cash equivalents


56,503

6,337



67,225

36,377

Assets held for sale


-

631

Total assets


77,379

61,932





Current liabilities




Trade and other payables


(6,908)

(14,338)

Obligations under finance leases


(295)

(695)

Borrowings


(3,911)

(8,357)

Current tax liabilities


(129)

(334)

Total current liabilities


(11,243)

(23,724)





Non current liabilities




Borrowings


(1,075)

(2,434)

Obligations under finance leases


(176)

(765)

Deferred tax


(132)

(824)

Total non-current liabilities


(1,383)

(4,023)





Total liabilities


(12,626)

(27,747)





Net assets


64,753

34,185





Equity




Share capital


1,387

1,385

Share premium account


10,903

10,873

Capital redemption reserve


814

814

Merger reserve


-

402

Translation reserve


(8)

(202)

Other reserves


180

180

Investment in own shares


(1,000)

(1,000)

Retained earnings


52,477

21,733

Total equity attributable to equity holders of the parent


64,753

34,185





 

 

 

Consolidated Cash Flow Statement for the year ended 31 May 2016

 

 

Note

2016

2015



£'000

£'000

Operating activities




Cash flows from operating activities


7,885

1,832

Finance costs paid


(146)

(213)

Income tax repaid


52

27

Net cash inflow from operating activities


7,791

1,646





Investing activities




Acquisition of subsidiary undertakings , net of cash acquired

5

(3,500)

(1,137)

Disposal of subsidiary undertakings, net of cash

6

53,677

-

Finance income


554

1

Purchase of intangible assets


(766)

(1,582)

Purchase of property, plant and equipment


(1,062)

(832)

Proceeds from sale of intangible assets


9

-

Proceeds from sale of property, plant and equipment


1,319

103

Net cash generated/(used) by in investing activities


50,231

(3,447)





Financing activities




Equity dividends paid


(830)

(740)

Repayments of bank loans


(4,156)

(440)

Repayments of obligations under finance leases


(1,176)

(901)

Proceeds from issue of ordinary shares


32

61

Borrowings raised


1,651

1,875

Net cash outflow from financing activities


(4,479)

(145)





Net increase/(decrease) in cash and cash equivalents


53,543

(1,946)

Cash and cash equivalents at beginning of year


(361)

1,428

Effect of foreign exchange rate changes on cash


(259)

157

Cash and cash equivalents at end of year


52,923

(361)

 

 

 

 

Cash flows from operating activities: for the year ended 31 May 2016




2016

2015


£'000

£'000

Continuing operations



Profit/(loss) before income tax from continuing operations

245

(1,323)

Profit before income tax from discontinued operations

3,878

3,194

Adjustments for:



Depreciation

1,520

1,438

Amortisation of intangible assets

983

831

Profit on disposal of property, plant and equipment

(489)

(102)

Finance income

(554)

(1)

Finance expenses

146

212

Research and Development Expenditure Credit

(168)

(235)

Share based payment charge

36

43

Bargain purchase on acquisition (note 5)

(172)

-




Changes in working capital



(Increase)/decrease in inventories

(2,327)

1,128

Increase trade and other receivables

(556)

(1,192)

Increase/(decrease) in trade and other payables

5,339

(1,477)

Decrease in provisions

-

(689)

Other non cash changes

4

5

Cashflows from operating activities

7,885

1,832

 

 

 

Notes to the Preliminary Statement

31 May 2016

 

1. Segmental analysis

 

Year ended 31 May 2016



Energy

 and

 Medical

Unallocated

 Central

 Items

Total




£'000

 £'000

£'000







Revenue



21,177

-

21,177







Operating profit/(loss)



59

(286)

(227)

Net finance costs





472

Taxation





175

 

Profit after tax





420







Segment non-current assets



10,154

-

10,154

Segment assets



20,427

56,952

77,379







Segment liabilities



(7,952)

(4,674)

(12,626)







Net assets



12,475

52,278

64,753







Non-current asset additions






Intangible assets



330

-

330

Tangible assets



430

-

430




760

-

760







 

Year ended 31 May 2015


Discontinued Operations

Energy

 and

 Medical

Unallocated

 Central

 items

Total



£'000

£'000

 £'000

£'000







Revenue


 

22,557

-

22,557







Operating loss



(743)

(489)

(1,232)

Net finance costs





(91)

Taxation





540

 

Profit after tax





(783)







Segment non-current assets


14,619

10,304

-

24,924

Segment assets


35,680

22,113

4,139

61,932







Segment liabilities


(13,064)

(11,871)

(2,812)

(27,747)







Net assets


22,616

10,242

1,327

34,185







Non-current asset additions






Intangible assets


1,232

350

-

1,582

Tangible assets


764

422

-

1,186



1,996

772

-

2,768

 

 

 

 

Notes to the Preliminary Statement (continued)

31 May 2016

Geographical



2016

2015

2016

2015



 

Revenue

Revenue

Non-current

assets

Non-current

Assets



£'000

£'000

£'000

£'000







United Kingdom


16,027

19,375

8,628

21,388

Europe


511

545

-

-

North America


1

37

-

-

Rest of World


5,387

3,150

1,528

3,536

Eliminations


(749)

(550)

-

-



21,177

22,557

10,154

24,924


The Group had Energy & Medical revenue of £6,977,000 and £2,284,000 (2015: £7,228,000) with single external customers under common control, which each represent more than 10% of the Group's revenue.

2. Adjusted Earnings before interest, tax, depreciation and amortisation 

 


2016

2015


£'000

£'000




Profit/(loss) before tax from continuing operations

245

(1,323)

Share based payment expense

21

26

Restructuring costs

272

195

Profit on disposal of property

(446)

-

Start up costs - China

-

450

Adjusted profit before tax

92

(652)




Finance income

(554)

(1)

Finance cost

82

92

Adjusted Earnings before interest, tax and amortisation from business combinations  ('EBITA')

(380)

(561)




Depreciation

505

573

Amortisation of other intangible assets

229

288

Adjusted Earnings before interest, tax, depreciation and amortisation ('EBITDA')

354

300

 

The Directors believe that the above adjusted earnings are a more appropriate reflection of the Group performance.

 

3. Taxation

 


2016

2015


£'000

£'000




Current tax

(63)

(360)

Deferred tax

(112)

(180)


(175)

(540)

 

 

 

Notes to the Preliminary Statement (continued)

31   May 2016

 

4. Earnings per ordinary share

 

 


2016

2015


Number

Number




Weighted average number of shares - basic

27,725,452

27,643,480

Share option adjustment

230,934

343,457

Weighted average number of shares - diluted

27,956,384

27,986,937





2016

2015


£'000

£'000




Earnings/(loss) from continuing operations

420

(783)

Share-based payments

21

26

Restructuring costs

272

195

Start up costs - China

-

450

Profit on disposal of property

(446)

-

Adjusted earnings/(loss) attributable to shareholders

267

(112)




Basic earnings per share

1.5p

(2.8)p

Adjusted basic earnings per share

1.0p

(0.4)p

Diluted earnings per share

1.5p

(2.8)p

Adjusted diluted earnings per share

1.0p

(0.4)p




Earnings from discontinued operations

30,716

2,554

 




 

Basic earnings per share

110.8p

9.2p

 

Diluted earnings per share

109.9p

9.2p

 




 

Earnings attributable to shareholders

31,136

1,771

 




 

Basic earnings per share

112.3p

6.4p

 

Diluted earnings per share

111.4p

6.3p

 

 

 

 

Notes to the Preliminary Statement (continued)                                                

31 May 2016

 

5. Acquisitions

 

Business combination - Rolls-Royce Pipe Manufacturing

On 4 March 2016 the group acquired the trade and certain business assets and liabilities relating to the manufacture of aerospace components of Rolls Royce Nuneaton and 100 percent of the issued share capital of Hartshill Ventures Limited. The acquisition was made to enhance the Group's position in the aerospace market. The provisional net assets at the date of acquisition were as follows:

 

Fair value of assets and liabilities acquired


£'000




Property, plant and equipment


1,181

Inventories


2,625

Trade and other receivables


596

Cash and cash equivalents


634

Trade and other payables


(465)

Provisions


(265)

Net assets


4,306

Intangibles assets identified


-

Goodwill


-



4,306




Fair value of consideration transferred:



Cash


4,134

Consideration


4,134




Cash acquired


(634)

Acquisition costs charged to expenses


12

Net cash paid relating to the acquisition


3,512

 

 

Management did not identify any intangible assets on acquisition of this business.

 

Acquisition costs arising from this transaction of £12,000 have been included in administration expenses included in discontinued operations.

 

The gain arising on the bargain purchase is £172k which had been credited within the result for discontinued operations within the consolidated income statement.

 

The Directors do not have access to the information to disclose the revenue and profit/ loss since acquisition.

 

The trade and assets from this acquisition were subsequently part of the Aerospace disposal on 27 May 2016.

 

Business combination - Sigma Swadlincote

On 11 August 2014 the group acquired the trade and certain business assets and liabilities relating to the manufacture of aerospace components of RMDG Aerospace Ltd for £1,137,000.

 

 

 

Notes to the Preliminary Statement (continued)

31 May 2016

 

6. Disposals - Aerospace Division

 

On 27 May 2016 the Group disposed of its Aerospace division (comprising Sigma Precision Components UK Limited, Sigma Precision Components Limited, C & H Precision Finishers Limited, Sigma Components (Derby) Limited, Sigma Components (Farnborough) Limited and Hartshill Ventures Limited, the net assets and liabilities at the date of disposal were as follows:

 



£'000

Goodwill


5,007

Other intangible assets


2,286

Property, plant and equipment


7,704

Inventories


12,636

Trade and other receivables


13,115

Cash and cash equivalents


583

Trade and other payables


(13,764)

Obligations under finance lease


-

Borrowings


-

Current tax liabilities


(739)

Provisions


(265)

Deferred tax


(326)

Net assets disposed


26,237




Consideration


65,000

Working capital adjustment


(1,400)

Debt adjustment


(4,944)

Cash disposed of


(583)



58,073

Disposals costs


(4,396)

Net cash received relating to acquisition


53,677




Cash proceeds


53,677

Adjust for cash disposed


583

Net assets disposed


(26,237)

Recycling of foreign exchange translation reserves and other non-cash adjustment


(477)

Profit on disposal


27,546

 

Included in the above profit on disposal is £477,000 of foreign exchange translation reserves recycled on disposal of the Aerospace division.

 

Included in Consideration is a retention of £1,450,000 held in escrow until 30 September 2017.

 

 

Notes to the Preliminary Statement (continued)                                                

31 May 2016

 

Disposals - Aerospace Division (continued)

 

Discontinued Operations

The results prior to the disposal on 27 May 2016 for the discontinued operations included in the consolidated income statement were:

 


2016

2015


£'000

£'000

Revenue

38,401

35,262

Operating profit

3,942

3,314

Interest

(64)

(120)

Profit before taxation

3,878

3,194

Taxation

(708)

(640)

Profit on disposal of discontinued operations

27,546

-

Profit after tax from discontinued operations

30,716

2,554

 

The Aerospace division contributed the following to the Group's cashflows:

 


2016

2015


£'000

£'000




Operating cashflows

9,141

2,019

Investing activities

(4,503)

(2,694)

Financing activities

(1,474)

(1,666)

 

7. Net cash/(debt) and gearing

 

The gearing ratio at the year-end is as follows:

2015

2015


£'000

£'000




Debt

(5,457)

(12,251)

Cash and cash equivalents

56,503

6,337

Net cash/(debt)

51,046

(5,914)




Equity

64,753

34,185

Net cash/(debt) to equity ratio

78.8%

(17.3)%

 

 

8. Preliminary statement and basis of preparation

This preliminary statement, which has been agreed with the auditors, was approved by the Board on 26 September 2016. It is not the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The statutory accounts for the two years ended 31 May 2016 and 2015 received audit reports which were unqualified and did not contain statements under s498(2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 May 2015 have been delivered to the Registrar of Companies but the 31 May 2016 accounts have not yet been filed.

The Company's financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and those parts of the Companies Act 2006 that apply to companies reporting under IFRS. The principal accounting policies adopted by the company, which remain unchanged, are set out in the statutory financial statements for the year ended 31 May 2016.

 

Notes to the Preliminary Statement (continued)

31 May 2016

 

9. Annual report and Accounts

The Report and Accounts for the year ended 31 May 2016 will be available on the Group's website www.avingtrans.plc.uk on or around 3 October 2016.  Further copies will be available from the Avingtrans' registered office:

 

Chatteris Business Park, Chatteris, Cambridgeshire PE16 6SA.

 

 

10. Annual General Meeting

The Annual General Meeting of the Group will be held at Shakespeare Martineau LLP, No1 Colmore Square, Birmingham, B4 6AA on 8 November 2016 at 11:00am


This information is provided by RNS
The company news service from the London Stock Exchange
 
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