Avingtrans

Critical components manufacturer Avingtrans (AVG) has delivered solid interim results, fuelled by a strong performance in its aerospace division.

The AIM-listed company has deliberately targeted global OEMs and is reaping the benefits of a number of long-term contracts. In the period to November, sales increased 20% to £20.2m as pre-tax profits soared by two-thirds to £846,000. There is no half-year payout, but expectations are of a final dividend up 50% to 0.6p.

Behind the overall result, the aerospace arm boosted revenues 30% to £7.8m, largely thanks to its rigid and flexible pipe assemblies business, Sigma Precision Components, which supplies the likes of Rolls-Royce. It recently landed a £3m contract with Goodrich that may lead to further work in the civil aerospace market. The shift to lightweight composites is also key to its future success – for example, the Boeing 787 is almost 50% made of composites.

Avingtrans has just acquired three operations from the receivers, bringing annual sales of £3m, as well as expanding the business into the F1 and other motorsport markets. In industrials, the Metalcraft division makes safety-critical kit for energy and medical markets, but it is also winning new work in the nuclear sector. The one weak spot was road signage operation Crown, which recorded a loss due to tough trading, but that is the smallest part of the group.

Ongoing investment in capital equipment has led to a £1.4m hike in debt, but Avingtrans is well within its facilities and has gearing of 34%. Overall order books are buoyant, so forecasts of a full-year pre-tax profit of £2.1m and EPS of 6.3p look achievable. We suggested the shares were undervalued in December at 59.5p, which remains our view. Buy.