March 2023 

Avingtrans PLC (ticker: AVG) manufactures and sells engineered components, systems, and services to the energy, medical, and infrastructure industries worldwide.

The company was incorporated in 1985 and is based in Chatteris, the United Kingdom.

Overview

Avingtrans is a UK-based engineering group that specializes in designing, manufacturing, and supplying critical components and associated services to a range of industries, including aerospace, energy, medical, and industrial markets. The company has a strong reputation for innovation and quality, and its expertise has been recognized by major international customers.

Founded in 2004, Avingtrans has grown rapidly through a combination of organic growth and strategic acquisitions. Today, the company has a global presence, with operations in the UK, USA, Europe, and Asia. Its main business segments include Aerospace, Energy and Medical, and Industrial.

The Aerospace segment of Avingtrans focuses on the design, development, and manufacture of precision components for the aerospace industry. The company has a long history of supplying high-performance components for commercial and military aircraft, including Airbus, Boeing, and BAE Systems. Avingtrans' aerospace products range from complex machined components to fully integrated systems, and the company is well known for its ability to deliver innovative solutions to the most demanding customer requirements.

The Energy and Medical segment of Avingtrans focuses on supplying critical components to the energy and medical industries. The company's products in this segment include heat exchangers, vacuum equipment, and specialized medical devices. Avingtrans is recognized as a leading supplier of high-performance components for the nuclear power industry, and its medical devices are used in a range of diagnostic and therapeutic applications.

The Industrial segment of Avingtrans focuses on the design and manufacture of specialized components and systems for a range of industrial markets, including marine, defense, and rail. The company's products in this segment include precision-engineered components, high-pressure valves, and filtration systems. Avingtrans' industrial products are designed to withstand harsh environments and operate reliably in demanding applications.

Avingtrans' success is built on its reputation for quality, innovation, and customer service. The company has a strong track record of delivering complex engineering projects on time and within budget, and its expertise has been recognized by major international customers. Avingtrans' commitment to continuous improvement is reflected in its ongoing investment in research and development, manufacturing technology, and employee training.

As you can see from the above, AVG have a good history of growth in the medium-term. And at the end of February, AVG released a strong set of interim results for the six months ended 30 November 2022.

Financial Highlights:
  • Group Revenue increased to £50.0m (2022 H1: £44.5m) in line with management expectations.
  • Gross Margin reduced marginally to 32.6% (2022 H1: 33.9%) as a result of OEM versus aftermarket mix
  • Adjusted EBITDA increased by 11.4% to £6.4m, as a result of higher revenues (2022 H1: £5.7m)
  • Adjusted EBITDA margin 12.8% (2022 H1: 12.9%)
  • Adjusted Profit before tax £4.0m (2022 H1: £3.8m)
  • Adjusted Diluted Earnings Per Share from continuing operations increased to 10.8p (2022 H1:10.2p)
  • Cash inflow from operating activities of £4.1m (2022 H1: £4.0m)
  • Net cash at 30 November of £17.3m, (31 May 2022: £16.7m) after further investments in Magnetica, Adaptix and working capital, due to on-going supply chain disruption effects.
  • Interim Dividend of 1.7 pence per share (2022 H1: 1.6 pence)
Operational Highlights:
  • Investments at Hayward Tyler, Energy Steel and Booth continue to bear fruit
  • Order book: stronger than average across the Group:
    • Order cover for FY23 is over 90%, at the end of January 2023
    • Nuclear sector orders and prospects increasing, especially in the USA
  • PIE strategy (Pinpoint-Invest-Exit) for organic growth and added value through M&A
    • Exciting potential for Medical in compact, helium-free MRI and 3D X-ray systems
    • Post period end - further Magnetica investment round completed, as planned
    • Further £2.0m convertible loan investment in Adaptix 3D X-ray
    • Planned exit of HT Luton site - continuing to pursue, but progress is slow
    • Post period end, Ormandy acquired the assets of competitors HEVAC and HES for £852k

 Commenting on the results, Roger McDowell, Chairman, said:
"Our proven Pinpoint-Invest-Exit ("PIE") model has once again delivered robust results in the period, exhibited by increased revenue and consistent gross margins, despite inflationary pressures and supply chain instabilities, to deliver a double digit % rising adjusted EBITDA.

"The Group continues to invest across its three divisions, with a focus on the global energy and medical markets, to position them for maximum shareholder value, by means of exits in the years to come. The MRI system development at Magnetica and 3D X-ray system development at Adaptix are proceeding to plan. We are witnessing on-going improvements in other business units, such as at Booth, as again demonstrated by the first half results. Our value creation targets continue to be accomplished as anticipated and are underpinned by a conservative approach to debt, which we see as critical during a period of on-going economic challenges.

"Our markets are continuously evolving and strategic M&A opportunities remain a priority for Avingtrans. Businesses like ours can command high valuations at the point of exit. Whilst the Board remains vigilant in the current environment, we are confident about the current direction and potential future opportunities across our markets.

"Strong order intake and timing of contract revenue recognition has provided management with good visibility over H2 2023 revenue and profits, on-going supply chain disruptions notwithstanding. Therefore, the Board remains cautiously confident about achieving full year market expectations."



Conclusion

In conclusion, Avingtrans is a highly-regarded engineering group that has established itself as a leading supplier of critical components and associated services to a range of industries. The company's success is built on its expertise, quality, and commitment to innovation, and its global presence makes it a trusted partner for major international customers. As Avingtrans continues to grow and expand its capabilities, it is well positioned to capitalise on new opportunities and maintain its leadership position in the engineering industry. We will be adding it to our investment tomorrow morning.