TIDMAVG
RNS Number : 6280A
Avingtrans PLC
30 September 2015
Avingtrans plc
("Avingtrans" or the "Group")
Preliminary Results for the year ended 31 May 2015
Avingtrans plc, which designs, manufactures and supplies
critical components, modules and associated services to the
aerospace, energy and medical sectors, today announces its
preliminary results for the twelve months ended 31 May 2015.
Financial Highlights
-- Revenue decreased by 4% to GBP57.8m (2014: GBP60.3m)
-- Adjusted EBITDA decreased by 6%, to GBP5.3m (2014: GBP5.6m)
-- Adjusted Profit Before Tax decreased by 16%, to GBP2.9m (2014: GBP3.5m)
-- Adjusted Diluted earnings per share decreased to 10.1 pence (2014: 13.7 pence per share)
-- Cash generated from operating activities GBP1.6m (2014: GBP1.6m)
-- Continued investment in capability and capacity: GBP2.4m (2014: GBP4.3m)
-- Net debt increased to GBP5.9m (31 May 2014: GBP3.6m). Gearing was 17% (2016: 11%)
-- Increased final dividend of 2.0 pence per share, Full year
total 3.0 pence (2014: Final 1.8 pence per share, Total 2.7 pence),
an increase of 11%
Operational Highlights
Aerospace revenues restricted, with a decrease of 7% versus
2014
-- Results hampered by first half customer destocking, second half stabilised
-- Restructuring of operations and closure of the Derby site
-- New contract wins with Airbus/PFW (GBP25m/10yr) and Sonaca (GBP5m/5yr)
-- Acquisition of RMDG assets for GBP1.2m from Tricorn plc boosted market share
-- C&H maintained strong performance
Energy and Medical division revenues flat, constrained by low
oil price, EBIT recovered in H2
-- Divisional restructuring implemented
-- Exciting GBP47m, 10-year contract win with Sellafield Ltd
-- EBIT losses significantly reduced, with a second half profit demonstrating progress
-- Crown's markets continued to improve and the business remains profitable
-- Quality & Delivery performance maintained across the
Group, despite new IT system implementation programme
Post Year End
-- Aldridge building sold for GBP1.1m net proceeds
Commenting on the results, Roger McDowell, Chairman, said:
"As previously communicated, the oil price collapse took its
toll on Group results and we were further buffeted by aerospace
customer destocking in our first half. We reacted quickly to
mitigate the effects of these challenges, limiting the revenue
decline to 4% and the decline in EBITDA to 6%. Adjusted diluted
earnings per share correspondingly decreased to 10.1 pence. Despite
continuing investment of GBP2.4m and the GBP1.2m acquisition of the
assets of RMDG from Tricorn plc, group net debt only increased to
GBP5.9m - lower than market expectations - with gearing at a modest
17%. Our aerospace orders have since stabilised, but the oil sector
remains depressed. Therefore, we have turned our attentions
elsewhere, with an impressive sign of the future coming from our
GBP47m, 10 year contract win with Sellafield Ltd. Our robust
position has enabled the Board to propose a 2.0 pence per share
final dividend, making 3.0 pence for the year, an increase of
11%."
Enquiries:
Avingtrans plc 01159 499020
Roger McDowell, Chairman
Steve McQuillan, Chief Executive Officer
Stephen King, Chief Financial Officer
Numis 0207 260 1000
David Poutney (Corporate Broking)
Richard Thomas (Corporate Finance and Nominated Adviser)
Newgate (Financial PR) 0207 553 9850
Adam Lloyd
Lois Engstrand
Ed Treadwell
About Avingtrans plc:
Avingtrans has become a significant organisation in the design,
manufacture and supply of critical components, systems and
associated services to global industrial markets from two
divisions: Aerospace and Energy and Medical.
Aerospace
Sigma Components Ltd - UK and China
Sigma is a market leader in rigid and flexible pipe assemblies
and components for prestigious aerospace customers such as Rolls
Royce, Bombardier, Airbus, Safran and Meggitt. Sigma also manufactures
precision prismatic components and composite components for the
aerospace industry from its purpose-built facilities in the UK
and Chengdu, China. Sigma Components operates from a number of
sites, as follows:
Hinckley, UK: centre for rigid pipe assemblies and components
and new product introduction.
Swadlincote, UK: (formerly RMDG): satellite facility to Hinckley,
producing pipe assemblies.
Farnborough, UK: centre for fabrications, ducts and other complex
assemblies
Chengdu, China: centre for precision prismatic components, now
also producing pipe assemblies
Buckingham, UK: centre for composite technology, parts and machining
services to customers in Aerospace, F1/Motorsport and industrial
markets.
Sandiacre, UK (C&H): centre for precision polishing and specialist
finishing of aero-engine turbine blades, compressor blades and
vanes for the power generation industries.
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.
Chairman's Statement
This has been a challenging year for the group and we have coped
with some strong headwinds in the period and have responded quickly
to changing market conditions. As previously reported, we were
impacted during the year by the oil price decline. This is an
on-going issue and we have taken strong remedial action to contain
this problem. We are also very grateful to our newest non-executive
director, Les Thomas, the CEO of Ithaca Energy Inc, who arrived
during the year in the teeth of the storm and helped us to
successfully navigate choppy waters.
Simultaneously, in our financial first half, we suffered from a
material decline in aerospace output, due to customer programme
volume changes and destocking. Whilst this challenge has not fully
abated, it has reduced markedly and we have had success in
restructuring our aerospace division and in winning new business,
to mitigate the effect on profit. Notably, we won a GBP25m, ten
year contract with PFW (part of Airbus) to produce parts and
assemblies for the A350, from our Farnborough facility. As
expected, the RMDG business (Swadlincote) whose assets were
acquired from Tricorn plc for GBP1.2m in the period - made a
GBP0.3m loss, which also affected the outcome for the year.
The run rate revenues in our financial second half returned to
the level of the previous period. However, we were unable to make
up for the first half shortfall, so that the overall result was a
decline in both revenue and profit over the full twelve months,
albeit broadly in line with revised market expectations. This is
frustrating, but the actions we took steadied the ship and prepared
us for a growth path once again in the FY16 year. Whilst we made
good progress with our restructuring programme in both divisions
(Aerospace and Energy and Medical), it was not possible to complete
this activity and some residual restructuring will spill over into
the current financial year (FY16).
Post year end, we sold the freehold of the Maloney Metalcraft
building at Aldridge for GBP1.1m, net of costs, which further
reduced the run rate cost of that operation, in a continuingly
depressed oil and gas market. On the other hand, the Energy and
Medical division was boosted by the win of a GBP47m, ten year
contract with Sellafield, for the provision of 3M3
(three-metre-cubed) boxes, for the storage of intermediate level
nuclear waste. This contract, together with a parallel contract
awarded to another vendor, is the first step in a commercially
significant programme by the UK government, under the auspices of
the Nuclear Decommissioning Authority (NDA), to repackage the
legacy nuclear waste for long term storage. Metalcraft is
well-placed to be a key partner for Sellafield in this programme,
over the next 30 years.
Therefore, despite some setbacks, our passion for the Aerospace,
Energy and Medical markets is undimmed and these markets still
provide strong medium-term prospects for growth.
We continued to invest in new skills in both divisions, driven
by the government sponsored "Sharing in Growth" (SiG) programmes,
where we are an active participant. It wasn't the best year to make
big investments, but we continued to invest in new technology -
particularly in composites - assisted by some grant funding. We
also invested GBP1.0m in new capex, production IT systems, etc, as
part of an on-going journey towards world-class manufacturing
capability.
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 02:01 ET (06:01 GMT)
Given the challenges faced in the year, we were satisfied with
the Aerospace recovery in the second half and with the year on year
progress in Energy and Medical, oil price notwithstanding. Both
divisions have to do better, but we have solid foundations to build
on. The second half improvement allowed us to deliver a result
close to revised expectations, with revenue down 4% versus the
previous period and adjusted EBITDA also down by 6%, bearing in
mind that EBITDA was negatively affected by RMDG. Orders and
prospects remain at a high level, except for oil and gas, where the
prospect bank is depressed. With a less favourable tax position
this year, adjusted diluted earnings per share declined by 26%, to
10.1 pence. Gearing rose to 17% on Net debt increasing by GBP2.3m,
to GBP5.9m, though half of the increase was attributable to the
RMDG asset purchase. Therefore, the balance sheet remains in good
shape, despite the investment in the year, of GBP2.4m.
Please rest assured we do not intend to hide behind external
market change factors, however convenient that may be. We know our
performance must improve and we believe it can do so -
significantly. Accordingly, the Board has declared an increased
final dividend, of 2.0 pence per share, rendering a full year total
of 3.0 pence, once again underlining our commitment to consistently
improve returns to our shareholders.
Finally, I would like to take this opportunity to thank our
employees for their hard work and dedication to deliver excellent
quality engineering products and services, especially in the
difficult circumstances of the last 12 months.
Roger McDowell
Chairman
29 September 2015
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, for example: Rolls Royce, Siemens and Safran. Our
core strategy is to build market-leading niche positions in our
chosen sectors of Aerospace, Energy and Medical and our
acquisitions have enabled Sigma and Metalcraft to develop the
critical mass necessary to achieve leadership in their respective
sectors.
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. Sigma and
Metalcraft are both well established in China, providing integrated
supply chain options for our customers.
Niche Market Positioning
Aerospace: Our strength lies in civil aerospace, where we
produce pipes for a number of aero-engine suppliers into the large
civil airliner market; and where we enjoy market leadership in
Europe, as well as a leading position as an independent supplier
globally. In addition, we are building a position in assemblies and
fabrications beyond pipes - e.g. in ducts, nacelles, etc - that
will allow us to access an even larger market. We also have UK
market leadership in the domain of aerospace component polishing
and finishing through Sigma's C&H subsidiary.
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 "new nuclear" and nuclear decommissioning
markets, as well as a variety of other niches in the renewable
energy sector and emerging markets like shale gas.
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, or 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.
Operations
Aerospace Division (Sigma)
Operational Key Performance Indicators (KPIs)
2015 2014
* Customer Quality - defects in parts per million (ppm) 5,209 3,732
* Customer on time in-full deliveries (%) 81 80
* Annualised staff turnover (%) 12.8 11.9
* Health, Safety and Environment incidents per head per
annum 0.06 0.1
The divisional quality and delivery performance were sustained
in the year, despite the implementation of new IT systems and the
introduction of the RMDG performance into the statistics.
Underlying staff turnover is higher than ideal, though turnover in
China is partly responsible for this and our staff retention there
is above average for the region. Health and safety incidents showed
a welcome positive trend.
The civil aerospace market remains robust, as evidenced at the
Paris air show in June 2015. Between them, Airbus and Boeing have a
backlog of circa 12,000 commercial jet orders to deliver and their
20 year demand projections remain at record levels. So, overall
market trends are still positive for Sigma, although, in contrast,
we saw output reductions in the early part of the year.
The acquisition of RMDG was challenging, since this business was
underperforming and loss-making on acquisition and its arrival into
the group coincided with a critical destocking decision by key
customers. This issue was acutely seen in our first financial
quarter, after which volumes stabilised. However, the damage was
done to the year's result, since it is not easy in aerospace to
replace lost volume quickly. Therefore, divisional restructuring
plans were accelerated to mitigate the damage and the benefits of
this action are anticipated to be seen in the financial year ended
31 May 2016. The division sustained its leadership position in the
aerospace pipes market niche.
Operations (continued)
Aerospace Division (continued)
Despite the first half setback, we continued to invest in our
new composite pipe technology and the prototypes we produced
created a buzz at the Paris air show amongst customers and
competitors alike. We secured further grant funding for composites
technology in the period and continued our internal investment
programme.
Prudent capital expenditure at Sigma continued, as we rolled out
our new Epicor manufacturing IT systems, to underpin our aspiring
world-class supplier status. Our OEM partners appreciate the
improvements in quality, delivery and capability that our focus is
bringing.
The Q1 blip drove down annual sales by 7%, to GBP35.9m, or an
underlying 13%, when first year sales from RMDG are excluded, as
compared to the prior year. Our order book is still strong, with
new long term agreements secured with PFW/Airbus for A350 parts
(worth GBP25m over 10 years) and with Sonaca (worth GBP5m over 5
years). These contracts help further diversify our customer
portfolio, whilst also better balancing airframe vs engine
applications.
Overall EBIT Aerospace margins were down significantly to 8%,
driven by the Q1 destocking issue, losses at RMDG and our decision
to continue with the composites investment programme. We expect to
eliminate two of these three drag factors in the current financial
year, so margins should rebound to prior levels. However, on-going
investment in new technology is expected, since we see this as an
essential longer-term differentiator.
Briefly summarising the main developments at the Aerospace
sites:
-- Hinckley's performance was severely impacted by Q1 destocking
events, though matters improved in the second half. Hinckley is
becoming the pipe production centre of excellence for the
division.
-- We exited the Derby site during the year and transferred its
production to Hinckley and Swadlincote (RMDG). We will conclude the
lease arrangements for this site in the current financial year.
-- Swadlincote (RMDG) had a challenging first year in the group
and we have worked hard to stabilize volumes and margins there. As
expected, the acquired business made a loss in the year of
GBP0.3m.
-- Farnborough's performance continued to improve in the period
and the site is consistently profitable. Delivery and quality are
close to normal levels of aerospace customer requirements. This
site joined the Sharing in Growth (SiG) programme in the year.
-- Chengdu's sales growth was curtailed by the associated
Hinckley Q1 sales reduction, though output had stabilised by
year-end. The capacity of the site will be increased this year, in
anticipation of further customer demand and the need to expand pipe
production in China.
-- Buckingham (Composites) saw development expenditure and
investment and, therefore, losses increase in the period, as we
focused on new customer development and new technology composite
pipes. This technology is exciting and has applications in a number
of sectors.
-- Sandiacre (C&H) had another strong and consistent year,
with the barrel-type polishing equipment investment paying
dividends and we anticipate further capital expenditure of this
sort in the FY16 year.
Energy and Medical Division (Metalcraft, Maloney Metalcraft and
Crown)
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 02:01 ET (06:01 GMT)
Operational Key Performance Indicators (KPIs)
2015 2014
* Customer Quality - defect free deliveries (%) 99.3 99.3
* Customer on time in-full deliveries (%) 97.0 92.5
* Annualised staff turnover (%) 5.7 8.6
* Health, Safety and Environment incidents per head per
annum 0.1 0.2
The divisional quality and delivery performance were sustained
in the year, despite disruption coming from the implementation of
new IT systems. Staff turnover reduced and is at an acceptable
level for this type of business. Health and safety incidents showed
a welcome positive trend.
The abrupt reduction in the oil price shattered the nascent
recovery at Maloney. The prospect bank that we had been carefully
nurturing evaporated, as customers delayed, or cancelled their
investment decisions, in response to the sharp drop in expected
returns. This reaction was quite universal, with relatively few
projects surviving once the smoke cleared. In consequence, we took
swift action to downsize the Maloney business and exit the Aldridge
manufacturing site. The sale of the building was completed just
after our year-end and we achieved a sale price for the freehold of
GBP1.1m, net of costs.
Operations (continued)
Energy and Medical Division (Metalcraft, Maloney Metalcraft and
Crown) (continued)
The oil price shock meant that our growth intentions gave way to
control of costs and the division scarcely grew at all, with
revenue up by only 1% over the prior year. Although we still
recorded a small loss for the year, the division did make a modest
profit in the second half and the -1% EBIT overall was much
improved over the previous twelve months. This loss included the
anticipated on-going start-up costs at our Metalcraft China
facility, where the build-up of MRI business from Siemens and
others has been slower than we would like. Crown continued to grow
and made a profit again, as transport infrastructure business
gradually returned and as we worked on an exciting new product for
a new customer in the recycling arena.
World energy consumption drivers continue to be positive
overall, given increasing globalisation and the demographics of an
ageing world population are encouraging for the medical imaging and
diagnostics market. However, the most significant development for
Metalcraft recently has been the award of the GBP47m /10 year
contract with Sellafield Ltd to produce 3M3 (three-metre-cubed)
boxes, for the storage of intermediate level nuclear waste. This
contract was awarded with a parallel contract to another vendor.
This represents the first step in a commercially significant
programme by the UK government, under the auspices of the Nuclear
Decommissioning Authority (NDA), to repackage the legacy nuclear
waste for long term storage. Metalcraft is well-placed to be a key
partner for Sellafield in this programme, over the next 30 years,
during which time the total value of similar equipment required is
likely to exceed GBP1bn, according to Sellafield's own
estimates.
Summarising developments over the year at the Energy and Medical
sites:
-- Metalcraft, Chatteris: business with Siemens and Cummins in
the UK was steady. Site delivery and quality consistency improved
and we began to see the initial growth of other repeat customers.
Key customer Heatric (Meggitt) saw the downside of the oil price
and hence, there was less business from them in the year. The site
rolled out the Epicor IT systems and this has been bedding-in
reasonably well over the last few months. The exciting nuclear
decommissioning contract win from Sellafield will result in site
preparations in the current financial year, but very little volume
of business, as the ramp up is quite slow. Further prospects in the
sector are now in view.
-- Metalcraft, Chengdu: as previously reported, start-up losses
have been higher than in our original plans for the facility, but
they are predictable and containable, as we seek to win business
from a broader customer set. In that respect, progress is
heartening.
-- Maloney Metalcraft, Aldridge: as noted above, the oil price
shock killed the prospects for the business and forced us into a
rapid cost base rethink. Whilst some restructuring costs have
spilled over into the new financial year, the project to reshape
the business is proceeding well and the sale of the building just
after year-end is an important piece of the plan to complete. A
deal with the new owners of the building means that we are able to
retain the engineering offices on a lease and thus avoid a
disruptive relocation of the technical team. The win of the $3m
Samsung Algerian gas field project in the second half proved that
the sector is not dead - just hibernating.
-- Crown grew once more, with transport infrastructure sales
increasing from a low base. There was also good progress with the
first project for a new customer involved in the recycling market.
Prospects for this technology seem very encouraging, thus
broadening the strategic options for Crown.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators
to monitor the business, as set out below.
Revenue: sales decline arrested in second half
Full year Group revenue was down by 4%, to GBP57.8m (2014:
GBP60.3m). Aerospace saw a 7% decline, including the revenue from
RMDG, driven by customer destocking in H1. Energy and Medical saw
marginal 1% growth, with the oil price severely holding back the
division's progress.
Profit: underlying margins stable on lower volumes
Adjusted EBITDA was down by 6% (note 2), to GBP5.3m (2014:
GBP5.6m). Aerospace profits were held back by expected losses at
RMDG and by the reduced first half revenue from customer
destocking. Energy and Medical made a modest profit in H2, after
making a small loss in the first half, thus recording a marginal
loss for the year.
Gross margins were 25% (2014: 24%), holding up reasonably in
adverse conditions.
Financial Performance (continued)
Tax: less favourable position this year
The effective rate of taxation was 5.3%, whereas 2014 was a
15.3% tax credit. During the year we benefited from the release of
an IBA deferred tax liability on the Maloney site and have
continued to benefit from Research and Development tax credits in
the UK and losses utilised in China. The tax position will
"normalise" in the coming years, though we anticipate some on-going
benefits - e.g. R&D tax credits.
Earnings per Share (EPS): back to "normal"
With a less favourable tax position, adjusted diluted earnings
per share declined by 26% to 10.1p pence per share (2014: 13.7
pence per share), based on 28.0 million shares (diluted weighted
average).
Funding and Liquidity: Balance sheet still strong
The net cash inflow from operating activities was GBP1.6m (2014:
GBP1.6m).
Net indebtedness (note 7) at year end stood at GBP5.9m (2014:
Net indebtedness: GBP3.6m). Balance sheet gearing was 17% (2014:
11%). Although we should note that around half of the increase is
attributable to the acquisition of RMDG assets from Tricorn plc in
the period.
Dividend: steady progress
The Board again voted to underline our progressive dividend
policy and we are pleased to be able to recommend at the AGM an
improved final dividend of 2.0 pence per share (2014: 1.8 pence per
share). This will be paid on 11 December 2015, to shareholders on
the register at 6 November 2015.
The Group continues to focus on exciting trading opportunities
in the Aerospace and Energy sectors and we see further prospects to
develop our offering, which should deliver long term growth and
shareholder value. The continued backing of our investors, coupled
with a positive relationship with the Group's principal bankers,
means we expect to have more than adequate financial resources to
continue to invest in the business. We also continue to develop
relationships with an array of potential stakeholders, assisted by
our consistent dividend track record.
People
During the year, we strengthened our leadership team, with the
appointment of Les Thomas, the CEO of Ithaca Energy Inc, to the plc
Board, underlining our commitment to the Energy market.
There were no other Board or top team management changes in the
period, but we continued to reinforce our management teams in both
divisions. Each of the businesses deepened its base of skilled
engineering and technical personnel, with intellectual property
development becoming more important to our future. Skills
availability remains challenging, in a tightening labour market,
but we do not expect to be unduly constrained by any shortages and
we continue to invest in skills - e.g. through apprenticeships - at
several locations. Both divisions significantly reduced headcount
in the last year, following the oil price and aerospace destocking
issues detailed elsewhere.
Outlook
The group is a niche engineering market leader in the Aerospace,
Energy and Medical sectors. With attractive structural growth
markets and durable customer relationships, we remain cautiously
confident about the future of Avingtrans. The oil price shock has
shown that we can cope well with downturns and we have the agility
and credibility to switch to other pertinent markets to sustain our
businesses. In particular, prospects for Civil Aerospace and
Nuclear Decommissioning are highly attractive.
Our strategy continues to produce significant new business wins
that support our results and provide good visibility of longer term
earnings. We have an excellent customer base which we can build
upon and differentiated product niches to exploit. We remain well
placed to benefit from further market consolidation.
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 02:01 ET (06:01 GMT)
The RMDG acquisition again emphasised 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 pursue
further opportunities to enhance long-term value.
Sigma and Metalcraft are clear leaders in their chosen niche
markets, providing customers with consistent quality as part of a
world class supplier journey. Our growing Chinese presence is
providing a crucial competitive advantage. Investors are asked to
endorse our strategy and join us in developing a great British
engineering story. As ever, we are grateful for your support.
Roger McDowell Steve McQuillan Stephen King
Chairman Chief Executive Officer Chief Financial Officer
29 September 2015 29 September 2015 29 September 2015
Consolidated Income Statement
for the year ended 31 May 2015 Note 2015 2014
GBP'000 GBP'000
Revenue 1 57,819 60,265
Cost of sales (43,297) (45,808)
--------- ---------
Gross profit 14,522 14,457
Distribution costs (1,226) (1,266)
Share based payment expense (43) (46)
Acquisition costs (68) (171)
Restructuring costs (360) (269)
Start up costs - China (450) (318)
Amortisation of intangibles from business combinations (137) (137)
Other administrative expenses (10,156) (12,181)
--------- ---------
Total administrative expenses (11,214) (13,122)
Bargain purchase on acquisition 5 - 2,615
--------- ---------
Operating profit 1 2,082 2,684
Finance income 1 8
Finance costs (212) (166)
--------- ---------
Profit before taxation 1,871 2,526
Taxation 3 (100) 388
Profit for the financial year attributable to equity shareholders 1,771 2,914
========= =========
Earnings per share:
From continuing operations
- Basic 4 6.4p 10.6p
- Diluted 4 6.3p 10.4p
========= =========
Consolidated statement of Comprehensive income
2015 2014
GBP'000 GBP'000
Profit for the year 1,771 2,914
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 395 (357)
Total comprehensive income for the year attributable to equity shareholders 2,166 2,557
======== ========
Consolidated statement of changes in equity
at 31 May 2015
Capital
Share redemp- Trans-
Share premium tion Merger lation Other Invest-ment in Retained
capital account reserve reserve reserve reserves own shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2013 1,353 10,305 814 402 (240) 180 (597) 18,298 30,515
Ordinary shares
issued 26 513 - - - - - - 539
Dividends paid - - - - - - - (599) (599)
Investment in own
shares - - - - - - (403) - (403)
Share-based
payments - - - - - - - 46 46
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Transactions with
owners 26 513 - - - - (403) (553) (417)
Profit for the
year - - - - - - - 2,914 2,914
Other
comprehensive
income
Exchange loss - - - - (357) - - - (357)
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Total
comprehensive
income for the
year - - - - (357) - - 2,914 2,557
--------- -------- -------- -------- -------- --------- ---------------- ---------- -------
Balance at 31 May
2013 1,379 10,818 814 402 (597) 180 (1,000) 20,659 32,655
========= ======== ======== ======== ======== ========= ================ ========== =======
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 gain - - - - 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
========= ======== ======== ======== ======== ========= ================ ========== =======
Consolidated Balance Sheet
at 31 May 2015 2015 2014
GBP'000 GBP'000
Non current assets
Goodwill 9,557 9,557
Other intangible assets 3,442 2,691
Property, plant and equipment 11,861 12,607
Deferred tax 64 83
Available for sale financial assets - -
---------- ----------
24,924 24,938
Current assets
Inventories 10,733 11,071
Trade and other receivables 19,030 17,740
Current tax asset 277 104
Cash and cash equivalents 6,337 7,204
---------- ----------
36,377 36,119
Assets held for sale 631 -
---------- ----------
Total assets 61,932 61,057
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========== ==========
Current liabilities
Trade and other payables (14,338) (15,811)
Obligations under finance leases (695) (773)
Borrowings (8,357) (6,436)
Current tax liabilities (334) (129)
Provisions - (689)
Total current liabilities (23,724) (23,838)
========== ==========
Non current liabilities
Borrowings (2,434) (2,267)
Obligations under finance leases (765) (1,314)
Deferred tax (824) (983)
---------- ----------
Total non-current liabilities (4,023) (4,564)
---------- ----------
Total liabilities (27,747) (28,402)
========== ==========
Net assets 34,185 32,655
========== ==========
Equity
Share capital 1,385 1,379
Share premium account 10,873 10,818
Capital redemption reserve 814 814
Merger reserve 402 402
Translation reserve (202) (597)
Other reserves 180 180
Investment in own shares (1,000) (1,000)
Retained earnings 21,733 20,659
Total equity attributable to equity holders of the parent 34,185 32,655
========== ==========
Consolidated Cash Flow Statement
for the year ended 31 May 2015 Note 2015 2014
GBP'000 GBP'000
Operating activities
Cash flows from operating activities 1,832 1,787
Finance costs paid (213) (166)
Income tax repaid/(paid) 27 (71)
--------- ---------
Net cash inflow from operating activities 1,646 1,550
--------- ---------
Investing activities
Acquisition of subsidiary undertakings , net of cash acquired 5 (1,137) 2,039
Finance income 1 8
Purchase of intangible assets (1,582) (1,275)
Purchase of property, plant and equipment (832) (2,992)
Proceeds from sale of property, plant and equipment 103 320
--------- ---------
Net cash used by in investing activities (3,447) (1,900)
Financing activities
Equity dividends paid (740) (599)
Repayments of bank loans (440) (680)
Repayments of obligations under finance leases (901) (786)
Proceeds from issue of ordinary shares 61 137
Borrowings raised 1,875 1,188
--------- ---------
Net cash outflow from financing activities (145) (740)
Net decrease in cash and cash equivalents (1,946) (1,090)
Cash and cash equivalents at beginning of year 1,428 2,681
Effect of foreign exchange rate changes on cash 157 (163)
--------- ---------
Cash and cash equivalents at end of year (361) 1,428
--------- ---------
Cash flows from operating activities:
for the year ended 31 May 2015
2013 2014
GBP'000 GBP'000
Continuing operations
Profit before income tax from continuing operations 1,871 2,526
Adjustments for:
Depreciation 1,438 1,229
Amortisation of intangible assets 831 891
Profit on disposal of property, plant and equipment (102) (261)
Finance income (1) (8)
Finance expenses 212 166
Research and Development Expenditure Credit (235) -
Share based payment charge 43 46
Bargain purchase on acquisition (note 5) - (2,615)
Changes in working capital
Decrease/(increase) in inventories 1,128 (146)
(Increase)/decrease in trade and other receivables (1,192) 1,564
Decrease in trade and other payables (1,477) (1,611)
Decrease in provisions (689)
Other non cash changes 5 6
Cashflows from operating activities 1,832 1,787
======= =======
Notes to the Preliminary Statement
31 May 2015
1 Segmental analysis
Energy Unallocated
and Central
Year ended 31 May 2015 Aerospace Medical Items Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 35,858 21,961 - 57,819
========= ======== =========== ========
Operating profit/(loss) 2,748 (177) (489) 2,082
Net finance costs (211)
Taxation (100)
--------
Profit after tax 1,771
========
Segment non-current assets 14,286 10,638 - 24,924
Segment assets 35,631 22,162 4,139 61,932
--------- -------- ----------- --------
Segment liabilities (14,975) (9,960) (2,812) (27,747)
--------- -------- ----------- --------
Net assets 20,656 12,202 1,327 34,185
========= ======== =========== ========
Non-current asset additions
Intangible assets 1,243 339 - 1,582
Tangible assets 796 390 - 1,186
--------- -------- ----------- --------
2,039 729 - 2,768
========= ======== =========== ========
Aerospace results include a business combination acquiring
certain of the trade and assets of RMDG Limited (note 5) which
contributed GBP2,314,000 and a loss of GBP275,000 to Group revenue
and profit after tax respectively.
Energy Unallocated
and Central
Year ended 31 May 2014 Aerospace Medical items Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 38,528 21,737 - 60,265
========= ======== =========== ========
Operating profit/(loss) 4,350 (1,243) (423) 2,684
Net finance costs (158)
Taxation 388
--------
Profit after tax 2,914
========
Segment non-current assets 14,419 10,519 - 24,938
Segment assets 35,400 21,947 3,710 61,057
--------- -------- ----------- --------
Segment liabilities (14,211) (10,871) (3,320) (28,402)
--------- -------- ----------- --------
Net assets 21,189 11,076 390 32,655
========= ======== =========== ========
Non-current asset additions
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Intangible assets 881 394 - 1,275
Tangible assets 1,302 1,690 - 2,992
--------- -------- ----------- --------
2,183 2,084 - 4,267
========= ======== =========== ========
Energy and Medical results includes the acquisition of the
Exterran UK limited (renamed Maloney Metalcraft) which contributed
GBP6,686,000 and GBP2,195,000 to Group revenue and loss after tax
respectively, which was offset above by the GBP2,615,000 bargain
purchase on acquisition (note 5).
Notes to the Preliminary Statement (continued)
31 May 2015
Geographical
2015 2014 2015 2014
Non-current Non-current
Revenue Revenue assets Assets
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 52,998 54,416 21,388 21,737
Europe 6,248 5,488 - -
North America 895 896 - -
Rest of World 3,987 3,614 3,536 3,201
Eliminations (6,309) (4,149) - -
57,819 60,265 24,924 24,938
========= ======= =========== ===========
The Group has Aerospace revenue of GBP12,744,000 (2014:
GBP13,314,000) and Energy & Medical revenue of GBP7,228,000
(2014: GBP7,597,000) 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
2015 2014
GBP'000 GBP'000
Profit before tax 1,871 2,526
Share based payment expense 43 46
Acquisition costs 68 171
Restructuring costs 360 269
Start up costs - China 450 318
Amortisation of intangible assets from business combinations 137 137
------- -------
Adjusted profit before tax 2,929 3,467
Finance income (1) (8)
Finance cost 212 166
------- -------
Adjusted Earnings before interest, tax and amortisation from business combinations ('EBITA') 3,140 3,625
Depreciation 1,438 1,229
Amortisation of other intangible assets 694 754
Adjusted Earnings before interest, tax, depreciation and amortisation ('EBITDA') 5,272 5,608
======= =======
The Directors believe that the above adjusted earnings are a
more appropriate reflection of the Group performance.
3 Taxation
2015 2014
GBP'000 GBP'000
Current tax 240 (214)
Deferred tax (140) (174)
100 (388)
======== ========
Notes to the Preliminary Statement (continued)
31 May 2015
4 Earnings per ordinary share
2015 2014
Number Number
Weighted average number of shares - basic 27,643,480 27,363,979
Share option adjustment 343,457 716,303
Weighted average number of shares - diluted 27,986,937 28,080,282
=========== ==========
2015 2014
GBP'000 GBP'000
Earnings from continuing operations 1,771 2,914
Share-based payments 43 46
Restructuring costs 360 269
Start up costs - China 450 318
Acquisition costs 68 171
Amortisation of acquisition related intangibles 137 137
Adjusted post tax earnings attributable to shareholders 2,829 3,855
=========== ==========
Basic earnings per share 6.4p 10.6p
Adjusted basic earnings per share 10.2p 14.1p
Diluted earnings per share 6.3p 10.4p
Adjusted diluted earnings per share 10.1p 13.7p
Notes to the Preliminary Statement (continued)
31 May 2014
5 Acquisitions
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. 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 GBP'000
Property, plant and equipment 354
Inventories 770
Trade and other receivables 17
Trade and other payables (4)
-------
Net assets 1,137
Intangibles assets identified -
Goodwill -
1,137
=======
Fair value of consideration transferred:
Cash 1,137
-------
Consideration 1,137
Cash acquired -
Acquisition costs charged to expenses 68
-------
Net cash paid relating to the acquisition 1,205
=======
Management did not identify any intangible assets on acquisition
of this business which was in a distressed state.
Acquisition costs arising from this transaction of GBP68,000
have been included in administration expenses before operating
profit.
Since acquisition the assets acquired contributed the following to the Group's cashflows:
GBP'000
Operating cashflows (395)
Investing activities -
Financing activities -
Business combination - Maloney Metalcraft
On 3 July 2013 the Group acquired 100 percent of the issued
share capital of Maloney Metalcraft Limited (formerly Exterran (UK)
Limited). The acquisition of this business resulted in a gain on
acquisition of GBP2,615,000 as a consequence of buying the business
in a distressed state. The gain on bargain purchase was separately
presented in the income statement before operating profit.
6 Events after the balance sheet date
On 1 July 2015 Maloney sold its freehold site for GBP1.1m net of
costs resulting in a profit of GBP0.5m.
Notes to the Preliminary Statement (continued)
31 May 2015
7 Net Debt and gearing
The gearing ratio at the year-end is as follows: 2015 2014
GBP'000 GBP'000
Debt (12,251) (10,790)
Cash and cash equivalents 6,337 7,204
---------- ----------
Net debt (5,914) (3,586)
Equity 34,185 32,655
---------- ----------
Net debt to equity ratio 17.3% 11.0%
========== ==========
8 Preliminary statement
This preliminary statement, which has been agreed with the
auditors, was approved by the Board on 29 September 2015. It is not
the Group's statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
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