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  • Writer's pictureMark Watson-Mitchell

Avingtrans – interims show that the robust PIE continues to taste better despite some lumps

The latest interim report from Avingtrans (LON:AVG) declared a healthy performance, even after on-going supply chain disruptions following Covid and the Ukraine conflict.


The £121m group, which has a proven operating model abbreviated to PIE – Pinpoint-Invest-Exit – manufactures and sells engineered components, systems, and services to the energy, medical, and infrastructure industries worldwide.


In the first half to the end of November 2022 the group increased its revenues to £50.0m (£44.5m) and its adjusted pre-tax profits were slightly better at £4.0m (£3.8m), earnings came out at 10.8p (10.2p) and amply covered a 1.7p (1.6p) dividend per share.


What was impressive was that the group’s order books were stronger than average, with over 90% cover for the 2023 end May year and then a good 55% plus for the coming year.


Group Operations


The group operates in three segments: Energy-EPM, Energy-PSRE, and Medical-MII.


The company designs, manufactures, integrates, and services electric motors and pumps, steam turbines, gas compressors, pressure vessels, blast doors, containers, and skidded systems.


It also designs and manufactures equipment for the medical, science and research communities, including products for medical diagnostic equipment; high-performance pressure, vacuum vessels, and composite materials for research organizations; and superconducting magnets and helium-free cryogenic systems for use in magnetic resonance imaging and nuclear magnetic resonance.


The PIE


Its PIE strategy is based on identifying ideal corporate candidates for reorganising, then investing in and creating organic growth before looking to sell that particular interest on to another party.


It has made three successful exits over the last few years and is constantly on the lookout for new situations in which to make such commitments.


It is a very sound strategy and takes time to enact, luckily the group has a good cash balance with which to adhere to its goals for adding value.


Chairman’s Comments


Chairman Roger McDowell stated that:


"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.


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."


Analyst Opinion – 510p Target Price


Analyst Richard Hickinbotham at Singer Capital Markets has a Buy rating out on the group’s shares with a 510p Target Price.


He is looking for £108.7m (99.1m) revenues for the year to end May, with £8.6m (£8.2m) adjusted pre-tax profits, earnings of 22.0p (21.8p) and a dividend of 4.4p (4.2p) per share.


For the coming year his estimates are for £116.5m of sales, £9.2m profits, 23.5p earnings and a 4.6p dividend.


Conclusion – looking for 450p in 2023


I have been following this group for years and consider that its shares, now down 15p after the report at 375p, are well worth the higher 17 times price-to-earnings rating on which they trade.


Having been up to 492p within the last year, I see them looking to get back up to the 440p/460p levels in 2023.

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