Engineering specialist Avingtrans (AVG:AIM) is eyeing up further acquisition opportunities as Government support schemes for businesses start to wind down.
The company acts somewhat like a private equity business in the engineering world, looking for firms that quite often are undervalued and distressed. Its stated strategy is ‘Pinpoint, Invest, Exit’.
The economic fallout from the coronavirus pandemic looks to have pushed a number of businesses into that category, and speaking to Shares chief executive Steve McQuillan said Avingtrans may be looking at ‘one or two acquisitions’ towards the end of the year.
‘WE'LL START TO SEE WHO'S STRUGGLING’
He said, ‘We have our eyes open and this sort of environment does provide opportunities for us. Once the government support schemes come to an end I think we’ll start to see which businesses are struggling.’
The furlough scheme, one of the main business support schemes, is set to finish at the end of October and will be replaced by another job support scheme, designed to protect ‘only viable jobs’ according to the Government and in which employers will have to contribute more to employee salaries.
McQuillian added current support measures create a ‘false position’ for some businesses, which could struggle towards Christmas time and some of which could be at risk of overtrading.
REINSTATING GUIDANCE
Avingtrans itself looks to be in a good position and has reinstated guidance for 2021 and 2022 given the strength of its order book, with its shares gaining 4% to 251p. The company said its dividend remained suspended due to Covid-19, but intends to reinstate payments in 2021.
While in its full year results to 31 May, the company reported a 9.5% increase in revenue to £113.9 million. Pre-tax profit fell slightly to £3.0 million from £3.1 million the year before, but its gross margin improved to 27.8% from 26.6%.
The company did flag pandemic-related issues experienced during the year including temporary factory closures, delayed orders and supplier parts delays, but said its markets continue to develop despite Covid-19.
