Avingtrans Plc (LON:AVG) has secured £21 million before expenses through an oversubscribed placing, giving the specialist precision engineering group additional funding to expand its position in the United States nuclear energy market.
The latest research note from Cavendish describes the fundraising as an important step in Avingtrans’ plans to establish and equip a new facility in Michigan. The location would be close to Energy Steel, one of the group’s existing US operations, and is intended to support rising demand from customers in the nuclear sector.
Avingtrans placed approximately 3.3 million new shares at 630p each. The placing price represented no discount to the prevailing share price cited in the report, while the new shares increased the number in issue by around 9.8%.
The proceeds are expected to fund capital expenditure, equipment and additional working capital for the proposed facility. Cavendish believes the investment could considerably increase the capabilities of Avingtrans’ Advanced Engineering Systems division, particularly through Hayward Tyler and Energy Steel.
David Buxton, Director of Research at Cavendish, said: “We applaud the organic investment with two established partners.”
US Nuclear Market Creates a Significant Long-Term Opportunity
Cavendish highlights Avingtrans’ established relationships in the nuclear market, including its work with Westinghouse. The broker believes these relationships could help the group participate in a substantial pipeline of potential US nuclear projects.
Management has estimated a serviceable obtainable market worth approximately $1.3 billion over ten years. The opportunity is linked to expected long-term growth in electricity demand, including increased power requirements from artificial intelligence infrastructure and data centres.
According to the research note, Avingtrans sees a clear route for relevant revenues to increase from around £35 million to £90 million. Initial revenue from the new facility is expected during the financial year ending May 2028, followed by a faster contribution as operations gather pace. Management is targeting an investment payback during 2030.
The scale and timing of this opportunity remain subject to customer demand, project schedules and the successful delivery of the new facility. Cavendish also recognises the execution and timescale risks associated with the investment.
Forecast Highlights
Cavendish has maintained its forecasts for the financial year ending May 2026 and made only modest operational changes to its May 2027 estimates. The principal near-term impact is dilution from the additional shares, although the placing is also expected to improve Avingtrans’ debt position.
Key Cavendish estimates include:
- Revenue of £163.2 million in FY2026, rising to £188.3 million in FY2027 and £219.7 million in FY2028.
- Adjusted EBITDA of £20.8 million in FY2026, £24.6 million in FY2027 and £31.1 million in FY2028.
- Adjusted pre-tax profit of £12.3 million in FY2026, £15.3 million in FY2027 and £20.6 million in FY2028.
- Adjusted earnings per share of 31.7p in FY2026, 35.4p in FY2027 and 45.3p in FY2028.
- An adjusted EBIT margin rising from 8.2% in FY2026 to 9.8% in FY2028.
- Closing net debt reducing from a forecast £12.0 million in FY2026 to £4.5 million in FY2028.
Cavendish expects year-on-year revenue growth of 16.6% in FY2028, alongside adjusted earnings-per-share growth of 28%. The broker says its assumptions are conservative and identifies possible upside from stronger customer demand and improved operational performance.
Target Price Increased to 770p
Cavendish has retained its Buy recommendation and increased its target price from 681p to 770p. Against the 630p share price used in the note, this represents potential upside of approximately 22%.
The broker’s FY2028 forecasts place Avingtrans on an adjusted price-to-earnings multiple of 13.9 times. Cavendish argues that this valuation does not fully reflect the growth potential within Hayward Tyler or the possible future value of the group’s medical imaging activities.
Buxton added: “The shares have performed well but, in our view, still offer significant upside to current levels.”
Cavendish’s sum-of-the-parts analysis also suggests that the market may currently be assigning little or no value to the Imaging division. However, the broker acknowledges that introducing new products and bringing the US facility into operation carry commercial and delivery risks.
The placing is expected to leave Avingtrans with sufficient financial flexibility to continue pursuing its established PIE strategy, which involves acquiring underperforming engineering businesses, improving their operations and seeking to realise value over time.
Final Thoughts
Avingtrans’ £21 million placing provides the group with funding to pursue a potentially substantial US nuclear opportunity while keeping forecast leverage at a relatively low level. Cavendish’s increased 770p target price reflects expected growth in Advanced Engineering Systems, the longer-term potential of Hayward Tyler and possible value from Imaging. Investors will now be watching the delivery of the Michigan facility, customer commitments and the pace at which the projected nuclear revenues develop.
