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Avingtrans reports stellar FY24 with record revenues and EBITDA ahead of expectations

12:32, 19th June 2024
Paul Hill
PMH Capital

Wouldn't it be great if all stocks were like specialist engineer Avingtrans (AVGFollow | AVG? Its shares have 12 bagged from 32p in Jan'10 to 385p (mrkcap £126m), representing a CAGR of 18.5% pa excluding dividends (1.2% yield).

This has been achieved by consistently exceeding City consensus and executing its core "Pinpoint-Invest-Exit" (PIE) strategy - buying quality companies at knock-down prices, materially improving performance, and then disposing of these assets at much higher prices, say 3-5 years later.

True to form today in a positive FY24 trading update, the company said that its adjusted EBITDA would be "materially ahead of expectations" at between £13m-14m (vs est £10m) on record revenues (est £137m vs £116.4m LY). The momentum has also been maintained into FY25.

Here Advanced Engineering - which serves the nuclear (life extension, decommissioning and new build), oil & gas, defence (eg Rolls Royce), transport (Blast proof doors for HS2 tunnels) and industrial sectors - delivered another "strong" performance, reflecting standout results from its Ormandy (re heat exchangers and HVAC products) and Hayward Tyler (mission critical motors and pumps) subsidiaries, alongside the successful integration of Slack & Parr, which was acquired in Aug'23.

The medical division made significant progress too with its novel 3D X-ray and helium-free MRI systems - where both received encouraging customer feedback at recent trade shows, indicating strong interest for these round-breaking small-form veterinary and orthopaedic products.

Indeed, Adaptix has already commenced early sales in the UK and US, with volumes anticipated to accelerate in FY25 after a slower than expected start.

Elsewhere, Magnetica expects volume production to begin in FY25 at its Brisbane and Houston sites - once FDA approval has been obtained in H1'25. This is slightly later than originally planned due to enhanced cyber security checks across the entire medical devices industry.

CEO Steve McQuillan commenting "We are very pleased with the Group's performance reporting record revenue with Adjusted EBITDA ahead of market expectations. Lower commercialisation costs in the Medical Division, some of which have been delayed in to FY25, have contributed to this performance but we are pleased that the Group is entering FY25 with record-level revenue from continuing operations, leading the Board to view the outlook for this year with confidence."

All told, house broker Cavendish has a 495p/share target price, based on FY25 adjusted EBITDA and EPS of £14.0m and 6p respectively on revenues of £161m.

Lastly, net debt (excluding IFRS 16) closed May'24 better than expected at £6.1m vs est £7.1m, thanks to the completion of several key projects and lower-than-budgeted medical spending.

FY24 results are scheduled for Sept 25, 2024.

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