In an uncertain world, investors are increasingly looking for tariff-resilient businesses with defensive market positions, stable profit margins, and secular growth dynamics.
Enter specialist engineer Avingtrans (AVG) who today released record H1'25 results and in-line guidance for May FY25 - with standout performances from Ormandy & Hayward Tyler who supply HVAC systems for data centres and high-tech solutions for nuclear power and other energy applications, and Booth and Metalcraft who provide 'blast-proof doors' and nuclear waste storage boxes.
All told, H1'25 sales and adjusted EBITDA impressively jumped 21.1% and 18.7% to £79m (£65.2m LY) and £8.7m (£7.3m) respectively - despite being adversely impacted by product mix, which trimmed gross margins to 30% vs 31.6% LY. Sure, net debt (pre IFRS leases) climbed to £8.9m (£6.1m May'24), but this simply reflected planned investments in Slack and Parr, Magnetica, and Adaptix, alongside working capital outflows as a result of higher turnover.
H1'25 adjusted PBT, EPS, and the dividend all ticked up nicely as well to £4.5m (£4.4m), 12.0p (11.7p) and 1.9p (1.8p), leaving the group ideally positioned to unlock substantial potential shareholder value from its successful "Pinpoint-Invest-Exit" strategy.
Indeed, I suspect we might see several disposals within its Advanced Engineering Division (AES) over the next 12-18 months that could deliver material cash returns from a treasure trove of high-quality assets across the energy, nuclear, oil & gas, defence, data centre, and industrial sectors.
Elsewhere, the exciting Healthcare division too continues to attract new distribution partners for its innovative smallform 3D X-ray and MRI scanners in both the US and Europe. Revenues are growing according to plan, with more material volume increases anticipated in future periods, especially once Magnetica submits its MRI application for FDA approval sometime later in 2025. Here, an IPO is also being considered for 2-3 years' time.
Going forward, there is 95%+ FY25 revenue cover from AES' backlog on top of >£100m worth of orders for future periods, providing strong visibility and confidence in meeting targets.
CEO Steve McQuillan commenting: "The Group continues to actively invest in both of its divisions, concentrating on the global energy, infrastructure and medical markets, to optimise shareholder value through future exits. With a strong H1'25 performance and a pleasingly robust order book, the Group is well-positioned to meet market expectations for the full year and the Board views the future with confidence."
Lastly, Singer Capital Markets has a 525p/share target price (nb based solely on AES), and is forecasting FY'25 turnover, EBITDA and adjusted EPS of £161m, £15m and 14.3p. On top, Singers believes the medical devices division is worth between £85m-£140m or another 251p-422p/share.
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