Avingtrans : Interim Results 6 months ended 30 November 2022

Avingtrans PLC (AIM: AVG), the international engineering group which designs, manufactures and supplies original equipment, systems and associated aftermarket services to the energy, medical and industrial sectors, today announces its 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
  Adj.*EBITDA increased by 11.4% to £6.4m, as a result of higher revenues (2022 H1: £5.7m)
• Adj.*EBITDA margin 12.8% (2022 H1: 12.9%)
• Adj. Profit before tax £4.0m (2022 H1: £3.8m)
• Adj. 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 (excluding IFRS16 debt) at 30 November of £17.3m, (31 May 2022: £16.7m) after further investments in Magnetica, Adaptix and working capital, due to on-goingsupply chain disruption effects.
• Interim Dividend of 1.7 pence per share (2022 H1: 1.6 pence)

*Adjusted to add back amortisation of intangibles from business combinations, acquisition costs and exceptional items and discontinued operations.

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."

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Avingtrans business units

Hayward Tyler - Luton & East Kilbride, UK and USA, China and India

Specialises in the design, manufacture and servicing of performance-critical motors and pumps for challenging environments.

Energy Steel, Inc - Rochester Hills, Michigan, USA

Provider of custom fabrications for the nuclear industry, specialising in: OEM parts obsolescence; custom fabrications; engineering design solutions; product refurbishment; on-site technical support.

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.

Booth Industries - Bolton, UK

Designs, manufactures, installs and services doors and walls which can be tailored to be: blast & explosion proof; fireproof; acoustically shielded; high security/safety; or combinations of the above.

Ormandy Group, Bradford, UK

Design, manufacturers and servicing of off-site plant, heat exchangers and other HVAC (heating, ventilation and air conditioning) products

Composite Products Ltd - Buckingham, UK

Centre for composite technology, parts and assemblies, serving customers in industrial markets.

Magnetica Ltd - Brisbane, Australia

Magnetica Limited specialises in the development of next generation MRI technologies, including dedicated extremity MRI systems and MRI system components. Magnetica has successfully built and tested a compact, integrated 3 Tesla orthopaedic MRI system, demonstrating clinical-quality imaging. Commercialisation of this system (and others) is on-going. Magnetica's structure now includes two other business units:

Scientific Magnetics - Abingdon, UK

Designs and manufactures superconducting magnet systems and associated cryogenics for a variety of markets including MRI and provides services for Nuclear Magnetic Resonance instruments.

Tecmag Inc - Houston, USA

Designs, manufactures and installs instrumentation, including consoles, system upgrades, and probes, mainly for Magnetic Resonance Imaging (MRI) and Nuclear Magnetic Resonance (NMR) systems.

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Chairman's Statement

We are once again pleased to be able to report a healthy first half performance by Avingtrans, despite the combined impact of on-going supply chain disruptions driven by the Russia / Ukraine conflict and the aftermath of Covid. A solid revenue performance versus H1 FY22 has again been enhanced by an improved EBITDA result, mainly due to increased revenue and profit in the EPM division. The gross margin percentage reduced modestly year on year, due to increased OEM sales in the mix. Gratifyingly, net cash was marginally ahead of the year end position, even after further investments in Magnetica, Adaptix and working capital expenditure, to mitigate supply chain issues. Order cover for FY23 remains robust across all divisions.

Our proven Pinpoint-Invest-Exit ("PIE") model continues to deliver results, with Booth and Energy Steel continuing to improve. Our medical imaging strategy continues to advance with the Magnetica teams making good progress with the design and build of our own compact MRI product for the orthopaedics market. The prospects for this new entity are exciting and, post period end, we committed to a further investment in Magnetica, which will take our overall stake to over 74%. We also made a further investment of £2m in Adaptix, via a loan note and, post period end, we were delighted to hear that their 3D X-ray system for orthopaedics was awarded 510(k)1 approval by the FDA in the USA. As a corollary, we have now completed our exit from third party MRI component manufacture in China. Also post period end, Ormandy acquired the assets of local competitor businesses HEVAC and HES for £852k and will integrate this business into its existing Bradford site.

The divisional management teams have shown fortitude in tackling the significant supply chain disruption issues which have affected us across the Group and we note some early signs of these issues easing. Our aftermarket plans continue to progress positively in EPM and PSRE, as we seek to outperform our competitors by winning a larger share of the installed base service and support business, both for our products and those of third parties. The improved end-user access provides a predictable and repeatable pipeline and enhances profitability. We remain keen to maximise the revenue opportunities arising from the aftermarket access afforded by our own businesses and through partnership deals.

The Engineered Pumps and Motors (EPM) division saw a first half revenue rebound by 16.8% year-on-year, despite the supply chain disruptions. Divisional margins also increased with Energy Steel's performance being sustained and further improvements expected by the year end. Although the Luton site sale process has been frustrated, first by the pandemic and now by the current economic challenges, the negotiations are on-going.

Process Solutions and Rotating Equipment (PSRE) reported more modest growth in revenue in H1, with divisional EBITDA consistent year-on-year, following a large jump in FY22. Booth's pleasing trajectory continues, with the record order book being complemented by steadily increasing revenues and profits. Year-on-year profits were also up modestly at Ormandy. The Sellafield 3M3 box contract is now solidly into its second phase at Metalcraft, with a steady flow of boxes being delivered each month. Composite Products' first half was subdued but there was no material impact on the division.

Meanwhile, in the Medical division, Magnetica has made steady progress in the development of its compact MRI system, which we expect to launch at the end of 2023. As noted above, post period end, we completed the latest fund- raising process for Magnetica and we made a further investment in Adaptix. Both businesses are targeting market sectors which currently lack effective MRI and X-ray solutions, such as orthopaedics and veterinary applications.

Following another solid performance, the Board is declaring an increase in the interim dividend of 6%, to 1.7 pence per share, demonstrating our continuing commitment to provide long term shareholder returns. Our positive view of Group prospects, supported by our prudent fiscal stance, underpins this decision.

In conclusion, the Board would like to thank all Avingtrans employees for their determination and resilience during another challenging period. We look forward with guarded optimism and are enthusiastic about the period to come.

Roger McDowell

Chairman

21 February 2023

Note 1: A 510(k) is a premarket submission made to the FDA in the USA, to demonstrate that the device to be marketed is as safe and effective,

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