Revenue rises but margins narrow for Avingtrans

Avingtrans reported a 30.4% increase in first-half revenue in its interim results on Wednesday, to £65.2m, compared to £50.0m in the same period last year.

The AIM-traded firm said that despite the growth, its gross margin experienced a slight reduction to 31.6% for the six months ended 30 November, from 32.6%, primarily due to changes in the mix between OEM and aftermarket sales.

Adjusted EBITDA rose 14.1% to £7.3m, attributable to higher revenues.

However, the adjusted EBITDA margin decreased to 11.2% from 12.8%, mainly driven by increased OEM sales and augmented investment in the medical division.

Adjusted profit before tax reached £4.4m, up from £4.0m in the prior year's first half, with adjusted diluted earnings per share from continuing operations rising to 11.7p from 9.8p.

Additionally, the company reported a cash outflow from operating activities of £3.6m, swinging from a £4.1m inflow a year earlier.

Net debt stood at £2.2m at the end of November, primarily due to various investments and ongoing supply chain disruptions.

Operationally, the advanced engineering systems division saw a 31.3% revenue increase to £63.7m, accompanied by a 20% rise in EBITDA to £8.5m.

After the period ended, the division saw the merger of EPM and PSRE, forming a new AES division under the leadership of Austen Adams.

Additionally, the acquisition of S&P's assets for £4.1m in August last year, and the successful integration of HES and Hevac into Ormandy Bradford, were noted as milestones.

The division secured significant contracts, including two nuclear decommissioning contracts worth £14.5m for Metalcraft, and defence contracts totalling £5.5m for HT Luton.

In the medical and industrial imaging division, revenue remained steady at £1.5m, with developments in MRI and x-ray products pending volume build-up.

Despite that, the division reported an increased EBITDA loss of £0.6m, widening from £0.2m a year earlier, which was put down to ongoing development projects.

The division's acquisition of Adaptix for £7.2m and Magnetica's appointment of Televere Systems as its first US distributor marked significant strategic moves.

Positive market response was reported at the RSNA imaging conference, showcasing demand for the division's products.

Adaptix also started sales of vet products in the UK and USA, with volumes expected to increase in the next fiscal year.

“Despite some continuing supply chain instability and inflationary pressures, our tried-and-tested pinpoint-invest-exit (PIE) approach produced strong results during the period, as evidenced by increased revenue and stable gross margins, resulting in a double-digit percentage growth in adjusted EBITDA,” said chairman Roger McDowell.

“The group has restructured itself, with the mature engineering business now all in one advanced engineering systems (AES) division.

“We continue to invest in AES and also in the medical and industrial imaging (MII) division.”

McDowell said the company was now deliberately structured for future exits that should maximise shareholder value.

“The marketing of the 3D x-ray systems at Adaptix and the development of MRI systems at Magnetica are proceeding to plan to hit key milestones in 2024.

“The first half results again demonstrate that we are proactively managing continuing progress in the AES division.

“Our value creation goals are on track, supported by a conservative approach to debt, which the board deem to be prudent at this time.”

At 1243 GMT, shares in Avingtrans were up 4.59% at 360.84p.

Reporting by Josh White for Sharecast.com.