Avingtrans plc (LON:AVG) Chief Executive Officer Steve McQuillan caught up with DirectorsTalk to discuss financial results, growing demand for nuclear engineering products, progress in medical imaging and opportunities in AI-driven data centres.
Q1: Steve, could you just talk us through the financial highlights from the year?
A1: It was a really strong year for us, we were really pleased with the results overall.
Revenue was up to a record 163 million, the adjusted EBITDA was over 20 million, and the profit margin was also improving a bit. The EPS really improved a lot, actually, the earnings per share went up 30% over 31 pence.
The net debt was in good shape, it was a bit better than we thought. We ended the year with 11.8 million net debt, which was, as I say, better than we thought and we ticked up the dividend as we always do, actually.
The other good thing that’s not shown anywhere on the slides is the order book is very strong. We’re over 90% order covered for this financial year and we’re about 50% order covered already for next financial year. So, that’s pretty solid.
Q2: Margins and profits have increased strongly again. Can you just talk us through the key drivers behind that improvement in profitability?
A2: I think there’s two key things for listeners and viewers.
One is that the engineering division got more aftermarket business last year. The percentage of that increased to 38% of total sales and as you know, aftermarket margins tend to be better than original equipment margins. So, that boosted the overall profitability.
The other key thing that happened was in the medical division, which we’re still investing a lot of money in, it reduced its losses. So, it’s still making losses, which is what we expected, but they were less than the previous year.
So, the combination of those two things is what led to the better result.
Q3: Now, the AES division continues to benefit from nuclear defence and AI-driven data centre demand, alongside the recent placing to expand Michigan. How significant have those been in supporting performance and order book visibility?
A3: Really significant, actually. It’s a good question because particularly nuclear is driving a lot of increase in sales at the moment and in the future, that’s going to be more new nuclear, which is what Michigan’s about in expanding the factory there.
In the meantime, a lot of it has been driven by existing nuclear power plants around the world, particularly America, but also Europe and South Korea, etc. and everybody is trying to keep those power plants going. So, they’ve got to upgrade all the components that wear out, and that includes stuff that we make, like pumps, etc.
So, we’re seeing a lot of orders to keep those plants going for longer than anybody expected, which is great.
Q4: You mentioned medical losses reducing. The medical and imaging division has hit some major milestones this year, can you just shed a bit of light on those for us?
A4: The bit we’re really excited about and pleased about is Adaptix getting through its regulatory approvals last year. It’s now got its FDA 510(k) approval, so it can sell orthopaedic product in America, and similarly, it’s now got a CE mark, so it can sell in the UK and Europe.
They’ve been working hard on that now, appointing distributors, setting up key opinion leaders. So, they’ve done all the things they need to do to tee up sales now. They haven’t really made many sales yet, but they’ve done everything in the prep they need to do. So, this should be a breakthrough year for them as they start to get sales in orthopaedics.
They’re also making really good progress on their non-destructive technical product. That’s got a tremendous pipeline of possible opportunities there now. Again, we know that the main application there is aerospace, particularly composite components, where it looks like the OEMs and the main players there can see things using the Adaptix system that they wouldn’t be able to see using conventional X-ray or ultrasound.
So, that’s really interesting to them, and that’s why the pipeline is building nicely there.
That will take time because we know that aerospace takes a long time to adopt new technology. So, we’re not supposing that that just shoots off into the stratosphere, pardon the pun, but we’re expecting that to build steadily as well.
So, they’ve been the main drivers of what we’re going to see in the next few months for aerospace, I think.
Q5: Just looking ahead to the first half, what can investors expect from Avingtrans?
A5: Well, hopefully, as I say, we will see some breakthrough news from medical, particularly from Adaptix, and I think we’ll see more of the same on nuclear, particularly.
You saw that we made this small acquisition of Joseph Oat Corporation IP in America this week and we’re just continuing to strengthen our position in nuclear, both in existing life extension-type activities, but also in new build, new technologies like small modular reactors, and then also in decommissioning in the UK.
So, all of that whole nuclear sector is just going to keep developing for us and that’s where our big focus is.
