Final Results

Embargoed: 0700hhrs, 6 September 2006 Avingtrans plc ("Avingtrans" or the "Group") Final Results for the Year Ended 31 May 2006 Highlights * Turnover up significantly to Â£32.5m (2005: Â£24.3m) * Profit after tax increased to Â£2.0m (2005: Â£1.3m) * Basic earnings per share before goodwill amortisation of 16.2p (2005: 13.6p) * Gearing reduced to 26% (2005: 41%) * Dividend proposed - 0.5p per share (2005: 0.5p) * Acquisition of 75% of Sigma for consideration of Â£0.3 million completed on 19 June 2006 Ken Baker, Chairman, commented, "The year ended 31 May 2006 has been a further year of profitable growth and consolidation. The acquisition of Sigma post year end has opened up new opportunities in the aerospace industries and in China." Contacts Avingtrans plc Hansard Communications Tel. 01159 499 020 Tel. 020 7245 1100 Ken Baker, Chairman Ben Simons Stephen King, Finance Director Chairman's statement On behalf of the Board of Directors, I am pleased to announce the results for Avingtrans plc for the year ended 31 May 2006 in which the Group attained a new record level of order intake, turnover and after tax earnings since joining AIM in June 2002. The year under review contains the first full year of activity of our October 2004 acquisition Stainless Metalcraft Limited (SMC) and has been a period largely concerned with integrating, managing and developing SMC and our continuing businesses for profitable growth. A number of acquisition opportunities were reviewed during the year and some remain active. Demand for the Groups products remained generally strong throughout the year with better than expected performance at both C&H Precision Limited (C&H) our aerospace component finishing facility and the Jena group of companies which provide ballscrew actuator products and services for the medical, aerospace and machinery industries in the EU and USA. Order intake at Crown UK made a good recovery in the second half of the year. Sales at SMC to its major customers for MRI scanner components, after a good first half, were significantly lower than planned in the last quarter due to a softening of demand in the US market and related inventory and manufacturing adjustments by the major MRI OEMs. The Company continued to review this situation and the broadening of the customer base at SMC. Financial performance Earnings before interest, tax, depreciation and goodwill amortisation (EBITDA) was Â£4.1m (2005: Â£3.2m) up 28% on improved turnover of Â£32.5m (2005: Â£24.3m) an increase of 34%. Operating profit for the period was Â£2.8m (2005: Â£2.3m). Profit after tax was Â£ 2.0m (2005: Â£1.3m) an increase of 51%, representing a 15.5% return on net assets. Basic earnings per share before goodwill amortisation for the year was 16.2p (2005: 13.6p) an increase of 19%. Cash flow from operating activities for the year was Â£2.7m (2005: Â£3.9m) with net cash at bank and in hand at the year-end of Â£1.2m (2005: Â£0.7m). The net debt at the year-end was Â£3.3m (2005: Â£4.2m) resulting in a gearing reduction to 26% (2005: 41%). Dividend In light of the financial performance highlighted above the Board is recommending to the shareholders at the AGM a final dividend of 0.5p per share making a total of 1.0p for the year (2005: 0.5p). This will be paid on 10 November 2006 to shareholders on the register at 15 September 2006. Acquisitions and investments The acquisition of 75% of Sigma for a consideration of Â£0.3 million was completed after the year end on 19 June 2006. The funding for the acquisition was from the Group's cash reserves. Sigma is currently operating as an engineering and procurement consultancy for the EU and USA aerospace industry with offices in Chengdu, Sichuan Province, China and Tamworth, England. Its plan with Avingtrans is to develop a manufacturing presence in Chengdu for the supply of precision components to the growing Chinese aerospace industry and to cover existing and increasing demand from the EU and USA. The Group continued its policy of investment in profit and efficiency enhancing equipment throughout the year. Jena saw the final installation and commissioning of a state of the art PC based Bosch test unit for high frequency motorised spindles in its Nottingham facility. A number of new pieces of equipment were also brought on line at SMC and Jena, Germany. Improvements to building and the environment were carried out throughout the Group. Capital expenditure for the year totalled Â£1.2 million and remains ahead of the costs of depreciation. Review of the year SMC, our largest operating subsidiary, continued its strong performance during the first nine months of the year with an increase in delivery of MRI scanner components to a number of the worlds largest MRI scanner OEMs and the delivery of scientific products to a number of EU companies and scientific institutions. A long term strategic review with Siemens was completed during the year which resulted in the raising of SMC to the status of a tier one supplier of MRI scanner components and the signing in April 2006 of a rolling two year supply agreement. Work continued on the broadening of the customer base at SMC with successful bids for scientific and research projects with international research institutions including ILL in Grenoble and CERN in Switzerland. The Jena group of companies successfully improved its performance during the year with improved sales of its ballscrew actuator and machine spindle products and services in all three locations in the UK, USA and Germany. Performance and order intake was particularly robust in Germany on the back of a strongly recovering German engineering economy. Efforts continued in the year in our pursuit of new customers and acquisitions in this operation. C&H continued to strengthen its position in the aerospace market as a supplier of precision polishing and finishing services with deliveries of finished blades increasing significantly during the year. A new three year agreement with Rolls Royce for the precision polishing of turbine and compressor blades and vanes for a variety of aero engines was entered into. Other polishing and finishing work on landing gear legs for aerospace applications was taken up in the second half of the year as the unit continued to expand its operations to meet with the increased demand for its services. Crown UK Limited (Crown), the Group's Bristol based road speed camera pole and railway signalling pole design and manufacturing facility recovered strongly in the second half of the year following the issue of the much delayed government report on road speed cameras in November 2005. Activity was centred on service work and the replacement of conventional camera installations with the latest digital cameras, which are of greater accuracy and require lower maintenance. Railway work was still difficult to come by during the year as programmes of development on the major inter-city routes continue to be held up in the planning stage. A number of overseas contracts were tendered for with some success in Canada, the mid-east and Australia. Two prototype camera housings were manufactured by Crown for Vehicle Sensor Technology Limited (VST) the newly formed Avingtrans Subsidiary who signed an exclusive worldwide 5 year renewable supply and service agreement with Vehicle Occupancy Limited, the owner of a patented system for the detection of the number of people in a motor vehicle. The system, which is still undergoing development, will make it easier to enforce priority lanes for car sharing initiatives and for differential tolling on roads, bridges, tunnels and car parks. Directors and senior management Avingtrans has continued to strengthen its senior management team and we welcomed a new Managing Director to Jena Germany. In accordance with the Articles of Association, Jeremy Hamer retires from the Board in rotation and offers himself for re-election at the AGM scheduled for 11 October 2006. Share warrants K M Baker (772,000) and S J Lawrence (398,000) exercised share warrants in the Company in February and March 2006 under investment and performance contracts entered into in 2002. The shares were awarded at a price of 50p each. In total 748,000 were sold into the market and 422,000 were retained by the two directors. As well as receiving the income from the issue of the shares during the year the Company also benefited from a tax credit of Â£300,000 in respect of the share issue. Outlook Order intake and sales continue to be very encouraging at C&H, Jena and Crown though some work for Crown on railway signalling may be postponed until the second half of FY 2007. The weakening US dollar and a softening US market does appear to be slowing growth in the MRI scanner market so reducing growth prospects at SMC in this product area. The Company has been developing other market areas and products for SMC are expected to keep SMC at full capacity particularly in the second half of the current year. Since the acquisition of Sigma two managers have expatriated to China, a Chinese management team has been put in place, the first batch of machine tools have been ordered and we expect to be operational in a new 30,000sq/ft facility by the end of 2006 as planned. A letter of intent to purchase components for up to Â£2 million per annum has been received by Sigma. Work also continues on the processing of suitable acquisition opportunities with a number under review. With most major economies remaining strong and the products and services offered by the Group remaining in demand we look forward to another year of profitable growth In closing I should like once again on behalf of the Board to heartily congratulate and thank all of the employees and co-workers for their successful efforts in the past year. K M Baker Chairman 6 September 2006 Consolidated profit and loss account for the year ended 31 May 2006 Note 2006 2005 (as restated) Â£'000 Â£'000 Turnover 1 32,490 24,329 Cost of sales (24,813) (17,821) Gross profit 7,677 6,508 Selling and distribution expenses (595) (765) Administration expenses and goodwill (4,287) (3,479) amortisation Operating profit: Operating profit before goodwill 3,188 2,542 amortisation Goodwill amortisation (393) (278) Operating profit 2,795 2,264 Interest receivable 4 5 Interest payable (349) (300) Profit on ordinary activities before 1 2,450 1,969 taxation Taxation on profit on ordinary activities 2 (489) (668) Profit for the financial year 1,961 1,301 Earnings per share - basic 3 13.5p 11.2p Earnings per share - diluted 3 12.6p 10.6p All the above results are from continuing operations Consolidated statement of total recognised gains and losses for the year ended 31 May 2006 2006 2005 Â£'000 Â£'000 Profit for the financial year 1,961 1,301 Other recognised gains and losses - exchange gains on translation of foreign 8 37 subsidiaries Total recognised gains and losses relating to 1,969 1,338 the year Reconciliation of movements in shareholders' funds 2006 2005 (as restated) Â£'000 Â£'000 Profit for the financial year 1,961 1,301 Issue of shares 585 4,144 Exchange gains on translation of foreign 8 37 subsidiaries Dividends (148) - Net change to shareholders' funds 2,406 5,482 Shareholders' funds at 1 June 10,240 4,758 Shareholders' funds at 31 May 12,646 10,240 Summarised consolidated cash flow statement for the year ended 31 May 2006 2006 2005 Â£'000 Â£'000 Net cash inflow from operating activities (see 2,710 3,917 below) Returns on investment and servicing of finance (365) (249) Taxation (529) (266) 1,816 3,402 Capital expenditure and financial investment (396) (558) Acquisitions (100) (8,154) Equity dividends paid to shareholders (148) - Management of liquid resources - - Financing (687) 5,521 Increase in net cash (see note 4) 485 211 Note: reconciliation of operating profit to net cash inflow from operating activities 2006 2005 Â£'000 Â£'000 Operating profit 2,795 2,264 Depreciation charges 898 627 Goodwill amortisation 393 278 (Gain)/loss on sale of tangible fixed assets (6) 1 Impairment of investment 11 33 Decrease/(increase) in stocks 1,127 (764) Decrease/(increase) in debtors 595 (1,016) (Decrease)/increase in creditors (3,103) 2,494 Net cash inflow from operating activities 2,710 3,917 Summarised consolidated balance sheet at 31 May 2006 2006 2005 (as restated) Â£'000 Â£'000 Fixed assets Intangible assets 6,777 6,739 Tangible assets 6,203 5,869 Investments 15 26 12,995 12,634 Current assets Stocks 3,190 4,566 Debtors 4,931 5,495 Cash at bank and in hand 1,398 909 9,519 10,970 Creditors: amounts falling due within one (6,284) (9,366) year Net current assets 3,235 1,604 Total assets less current liabilities 16,230 14,238 Creditors: amounts falling due after more (3,334) (3,801) than one year Provisions for liabilities and charges (250) (197) Net assets 12,646 10,240 Capital and reserves Called up share capital 771 713 Share premium account 4,310 3,783 Capital redemption account 813 813 Other reserves 180 180 Profit and loss account 6,572 4,751 Equity shareholders' funds 12,646 10,240 Notes to the preliminary statement 31 May 2006 1. Segmental analysis Class of business Turnover Profit before Tax Net Assets 2006 2005 2006 2005 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 By class of business Precision 10,189 9,454 1,161 819 3,851 3,385 Engineering Medical and 22,301 14,875 2,065 1,510 4,213 4,042 Scientific Unallocated central - - (431) (65) 4,582 2,813 items Net Interest - - (345) (295) - - Total 32,490 24,329 2,450 1,969 12.646 10,240 Turnover by geographical market Precision Medical and Total Total Engineering Scientific 2006 2006 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 Turnover by geographical origin United Kingdom 5,524 22,301 27,825 20,127 Europe 4,588 - 4,588 4,124 North America 77 - 77 78 Total 10,189 22,301 32,490 24,329 Turnover by geographical destination United Kingdom 5,341 20,118 25,459 18,483 Europe 3,929 1,548 5,477 4,655 North America 773 635 1,408 1,074 Rest of World 146 - 146 117 Total 10,189 22,301 32,490 24,329 2. Taxation 2006 2005 Â£'000 Â£'000 UK corporation tax 307 645 Foreign tax 129 - Current taxation 436 645 Deferred taxation 53 23 Group tax on profit on ordinary activities 489 668 3. Earnings per share 2006 2005 No No Weighted average number of shares - basic 14,544,793 11,594,530 Warrant/ Share Option adjustment 1,029,810 653,485 Weighted average number of shares - diluted 15,574,603 12,248,015 Â£'000 Â£'000 Earnings attributable to shareholders 1,961 1,301 Earnings attributable to shareholders before 2,354 1,579 goodwill amortisation Basic earnings per share 13.5p 11.2p Basic earnings per share before goodwill 16.2p 13.6p amortisation Diluted earnings per share 12.6p 10.6p 4. Analysis of net debt 1 June Cashflow Other non-cash Exchange 31 May Move-ments 2005 Changes 2006 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in 909 485 - 4 1,398 hand Bank overdrafts and (173) - - (2) (175) loans 736 485 - 2 1,223 Bank loans (3,468) 608 - - (2,860) Hire purchase (1,485) 664 (830) (3) (1,654) leases (4,953) 1,272 (830) (3) (4,514) Net debt (4,217) 1,757 (830) (1) (3,291) 5. Preliminary statement This preliminary statement, which has been agreed with the auditors, was approved by the Board on 5 September 2006. It is not the Company's statutory accounts. Statutory accounts will be sent to shareholders shortly. The statutory accounts for the two years ended 31 May 2005 and 2004 received audit reports which were unqualified and did not contain statements under s237 (2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 May 2005 have been delivered to the Registrar of Companies but the 31 May 2006 accounts have not yet been filed.

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