Engineering group Avingtrans (AVG:AIM) passed the £100m sales barrier and moved back into the black during a record year for the company.
Revenues for the year to 31 May jumped 34% to £105.5m, up from £78.9m 12 months ago, reflecting the first full year contribution after its acquisition of electric pump and motor business Hayward Tyler.
The firm also recorded a pre-tax profit of £3.1m, compared to a £4.5m loss last year, while adjusted EBITDA grew 65% to £9.4m.
Its shares nudged 0.7% higher to 242p, though it’s worth highlighting that £75m market cap Avingtrans isn’t the most liquid stock, with a significantly lower amount of trades occurring during periods away from its results when the company doesn’t have anything to tell the market.
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Avingtrans chairman Roger McDowell said that the record year for the firm in terms of orders, revenue and profit is down to its ‘well-proven Pinpoint-Invest-Exit strategy’.
The company acts somewhat like a private equity business in the engineering world, looking for firms that quite often are undervalued and distressed.
Most of the underlying teams carrying out the detailed work in these firms remain untouched, with Avingtrans taking over at the overall management level.
Avingtrans CEO Steve McQuillan tells Shares a lot of the firm’s acquisitions are turnaround stories, with the aim of ‘getting them on track and seeing the growth come through’.
A big part of the firm’s focus when it acquires a company is on its aftermarket business. Aftermarket refers to the accessories, spare parts and others goods and services used in repair and maintenance, typically after the initial sale has been made.
McQuillan said, ‘A lot of the businesses we acquire are old, traditional businesses with strong brands, but they have underserved aftermarkets.
‘That’s where we can add value, stripping out the aftermarket division almost like a standalone business, and really improving the pricing, customer service, speed, agility, etc. It’s a recipe we find works well for us at the moment.’
Due to its current investments, the business is split into three divisions.
This comprises two energy divisions, one with pumps and motors and the other involving rotating equipment like turbines, compressors, vessels and containers, as well as a medical division.
It’s worth noting the company is significantly exposed to the wider macroeconomic situation, i.e. it can get caught up in things like the US-China trade war, any possible issues that may arise from Brexit, etc.
While the economic picture around the world doesn’t look good at the moment, McQuillan said Avingtrans’ long-term customer relationships and contracts can help mitigate this risk.