PINPOINT-INVEST-EXIT
2021 Annual Report
About
Avingtrans plc has a proven
strategy of “buy and build” in
highly regulated engineering
markets, a strategy it has named
“Pinpoint-Invest-Exit”. Signifi cant
shareholder value is delivered
through a clear strategy, a strong
balance sheet and an agile and
experienced management team.
www.avingtrans.plc.uk
0011551_Avingtrans_Report_2021_v5.indd 1
0011551_Avingtrans_Report_2021_v5.indd 1
30/09/2021 11:56
30/09/2021 11:56
About us
Delivering shareholder value through a
proven strategy of Pinpoint-Invest-Exit in
highly regulated global engineering markets
Energy Division
Performance
critical solutions for
energy systems
The Group has a proven track record in
delivering shareholder value through PIE:
● Identifying and executing prudent deals with precision and speed
● Building strong brands and value from constituent parts
● Crystallising these gains with periodic sales of businesses at advantageous valuations
● Returning the proceeds to shareholders
Purchased Sigma1
2009
8
2010
9
2011
15
Sold JenaTec; Purchased Aerotech & PFW
2012
17
Purchased Maloney
2013
Purchased RMDG
2014
Oil price Shock
Purchased Rolls Royce pipes; Sold Sigma
Returned £19.4m to shareholders;
Purchase SciMag and Whiteley Read
Purchased Hayward Tyler Group
and Ormandy Group assets
Purchased Tecmag;
Exited Whiteley Read
Purchased Booth & Energy Steel
2015
2016
2017
2018
2019
2020
Purchased Magnetica, sold Peter
Brotherhood
20212
32
31
45
50
43
19
67
71
77
Medical Division
Innovative solutions
for medical systems
and research
137
Engineered Pumps and Motors (EPM) Division
The EPM division is built on one brand, Hayward Tyler. Established in 1815, Hayward Tyler designs, manufactures
and services performance-critical electric motors and pumps to meet the most demanding of applications for the
global energy industry, as both an OEM supplier and a trusted through life support partner.
Process Solutions and Rotating Equipment (PSRE) Division
The PSRE division comprises a number of established brands with expertise across the global energy market.
The brands specialise in the design, manufacture, integration and servicing of an extensive product and service
off ering including bespoke high-integrity doors, containers and skidded systems.
0
30
60
90
120
150
1Remaining 25% of Sigma. 2As at 23 September 2021.
Market Cap £m
Tender Offer £m
Timeline
2010 (38p)
2012 (98p)
2016 (180p)
2017 (235p)
2021 (335p)
Development of the
Precision instruments
The Aerospace Division,
Acquisition of the Hayward
Peter Brotherhood sold for an
aerospace and precision
business, JenaTec,
Sigma Components,
Tyler Group for £29.4m and
enterprise value of £35.0m,
components businesses
sold for £13.5m
sold for £65m
creation of Energy and
and acquisition of Magnetica
Medical Divisions
Medical (MII)
The medical division has special expertise in the design and manufacture of innovative equipment for the medical,
science and research communities. Including cutting-edge products for medical diagnostic equipment; high
performance pressure, vacuum vessels and composite materials for research organisations; superconducting
magnets and helium-free cryogenic systems.
0011551_Avingtrans_Report_2021_v5.indd 2
0011551_Avingtrans_Report_2021_v5.indd 2
30/09/2021 11:57
30/09/2021 11:57
0011551_Avingtrans_Report_2021_v5.indd 3
0011551_Avingtrans_Report_2021_v5.indd 3
30/09/2021 11:57
30/09/2021 11:57
About us
Delivering shareholder value through a
proven strategy of Pinpoint-Invest-Exit in
highly regulated global engineering markets
Energy Division
Performance
critical solutions for
energy systems
The Group has a proven track record in
delivering shareholder value through PIE:
● Identifying and executing prudent deals with precision and speed
● Building strong brands and value from constituent parts
● Crystallising these gains with periodic sales of businesses at advantageous valuations
● Returning the proceeds to shareholders
Purchased RMDG
2014
45
32
31
Purchased Sigma1
2009
8
2010
9
2011
15
Sold JenaTec; Purchased Aerotech & PFW
2012
17
Purchased Maloney
2013
Oil price Shock
Purchased Rolls Royce pipes; Sold Sigma
Returned £19.4m to shareholders;
Purchase SciMag and Whiteley Read
Purchased Hayward Tyler Group
and Ormandy Group assets
Purchased Tecmag;
Exited Whiteley Read
Purchased Booth & Energy Steel
2015
2016
2017
2018
2019
2020
Purchased Magnetica, sold Peter
Brotherhood
20212
50
43
19
67
71
77
0
30
60
90
120
150
1Remaining 25% of Sigma. 2As at 23 September 2021.
Market Cap £m
Tender Offer £m
137
Engineered Pumps and Motors (EPM) Division
The EPM division is built on one brand, Hayward Tyler. Established in 1815, Hayward Tyler designs, manufactures
and services performance-critical electric motors and pumps to meet the most demanding of applications for the
global energy industry, as both an OEM supplier and a trusted through life support partner.
Process Solutions and Rotating Equipment (PSRE) Division
The PSRE division comprises a number of established brands with expertise across the global energy market.
The brands specialise in the design, manufacture, integration and servicing of an extensive product and service
off ering including bespoke high-integrity doors, containers and skidded systems.
Medical Division
Innovative solutions
for medical systems
and research
Timeline
2010 (38p)
2012 (98p)
2016 (180p)
2017 (235p)
2021 (335p)
Medical (MII)
The medical division has special expertise in the design and manufacture of innovative equipment for the medical,
science and research communities. Including cutting-edge products for medical diagnostic equipment; high
performance pressure, vacuum vessels and composite materials for research organisations; superconducting
magnets and helium-free cryogenic systems.
Development of the
Precision instruments
The Aerospace Division,
Acquisition of the Hayward
Peter Brotherhood sold for an
aerospace and precision
business, JenaTec,
Sigma Components,
Tyler Group for £29.4m and
enterprise value of £35.0m,
components businesses
sold for £13.5m
sold for £65m
creation of Energy and
and acquisition of Magnetica
Medical Divisions
0011551_Avingtrans_Report_2021_v5.indd 2
0011551_Avingtrans_Report_2021_v5.indd 2
30/09/2021 11:57
30/09/2021 11:57
0011551_Avingtrans_Report_2021_v5.indd 3
0011551_Avingtrans_Report_2021_v5.indd 3
30/09/2021 11:57
30/09/2021 11:57
“
Commenting on the results,
Roger McDowell, Chairman, said:
“"The Group forged ahead despite
continuing adverse impact from Covid-19
and we ended the year with record adjusted
profits and a solid cash position. Once again,
our Pinpoint-Invest-Exit Strategy (“PIE”) has
proved its worth with the successful sale of
Peter Brotherhood delivering excellent
returns for our shareholders. This is a great
credit to our management team and
excellent staff across all of our businesses
and my thanks go to them for their very
significant efforts and achievements and the
support of our stakeholders.”
Financial highlights
● Revenue from continuing operations increased by 7.1% to
£98.5m (20202: £92m)
● Gross Margin improved to 30.4% (20202: 26.8 %)
● Adjusted1 EBITDA from continuing operations increased by
78.5% to £12.5m (20202: £7.0m)
● Adjusted1 PBT from continuing operations increased to £7.7m
(20202: £2.6m)
● Adjusted1 Diluted earnings per share from continuing
operations were boosted to 22.4p (20202: (8.0p)
● Peter Brotherhood sold for an enterprise value of £35.0m
● Net Cash excluding IFRS16 £23.3m (Net Debt 31 May 2020:
£7.4m)
● Dividend re-instated at 4.0p per share
Operational highlights – Energy
● Revenue increased 11.1% to £89.0m (20202 £80.1m)
● Energy Steel continues to recover positively
● Award of outline planning permission for HT Luton site
● Successful disposal of Peter Brotherhood
● Enhanced contract to supply the important 3M3 boxes – up by
£20m to £70m
● Record order book for Booth
Operational highlights – Medical
● Revenue decreased to £9.6m (2020: £11.9m) as pivot away
from third party component manufacture
● Division transformed into a niche MRI market player, following
acquisition of majority stake in Magnetica
● Potentially significant market opportunities in orthopaedic and
veterinary imaging
1 Adjusted to add back amortisation of intangibles from business combinations, acquisition costs and
exceptional items
2 2020 Restated for discontinued Peter Brotherhood
0011551_Avingtrans_Report_2021_v5.indd 4
0011551_Avingtrans_Report_2021_v5.indd 4
30/09/2021 11:57
30/09/2021 11:57
Company Information
For the year ended 31 May 2021
Company registration number:
01968354
Registered office:
Directors:
Website:
Secretary:
Bankers:
Registrars:
Chatteris Business Park
Chatteris
Cambridgeshire
PE16 6SA
R S McDowell (Non-executive Chairman)
S McQuillan (Chief Executive Officer)
S M King (Chief Financial Officer)
L J Thomas (Non-executive Director)
J S Clarke (Non-executive Director)
www.avingtrans.plc.uk
Royal Bank of Scotland
2 St Philips Place
Birmingham
B3 2RB
S M King
HSBC Bank plc
PO Box 68
130 New Street
Birmingham
B2 4JU
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Nominated advisor and broker:
Singer Capital Markets Advisory LLP
1 Bartholomew Lane
London
EC2N 2AX
Solicitors:
Independent Auditor:
Shakespeare Martineau LLP
No1 Colmore Square
Birmingham
B4 6AA
Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
The Colmore Building
20 Colmore Circus
Birmingham
B4 6AT
1
Index
Chairman’s statement
Strategic Report
Report of the directors
Corporate governance
Report of the directors on remuneration
Independent auditor’s report
Principal accounting policies
Consolidated income statement and statement
of comprehensive income
Consolidated balance sheet
Company balance sheet
Page
3
4 – 20
21 – 24
25 – 29
30 – 31
32 – 42
43 – 55
56
57
58
Consolidated statement of changes in equity
59 – 60
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the annual report
Notice of Annual General Meeting
61
62
63
64 – 96
97 – 100
2
Chairman’s Statement
Despite some adverse effects from the Covid-19 pandemic, the Board was pleased with the Group’s performance for the year,
with record adjusted EBITDA (note 4) from continuing operations and a very solid net cash position at year end, driven by the
successful disposal of Peter Brotherhood Limited (PB) in March 2021, for an enterprise value of £35m. It is pleasing to note a
number of important new order wins, both in the year and post-period end, which have bolstered the order book going into FY22.
Crucially, our Pinpoint-Invest-Exit (“PIE”) strategy came to the fore once again, not only in the disposal of PB, but also in
the recovery progress at Booth and Energy Steel and in the acquisition of a majority stake in Magnetica (MNA) in Australia.
Shareholders will recall that the assets of Booth Industries in Bolton, UK and Energy Steel in Michigan, USA were acquired
in June 2019. Since then, both of these turnaround opportunities have made good progress, with Booth, in particular, now
contributing strongly to Group results.
The divisional management teams have again demonstrated their agility and resilience in the period, continuing to build strong
business platforms, despite the disruptions due to Covid-19. These effects caused us to enact certain targeted restructuring and
other changes, to optimise business performance. Nonetheless, our focus remains on growing strong and valuable businesses.
Aftermarket growth in Engineered Pumps and Motors (EPM) and Process Solutions and Rotating Equipment (PSRE) remains
central to developing robust value propositions, in order to support OEM and end-user customers. The end-user access provides
a more predictable and repeatable pipeline, drives improved profitability and underpins product and service development.
The EPM division delivered an improved result for the year, despite some on-going Covid-19 disruptions to supply chains and
order placement. Energy Steel continued to recover positively, with good aftermarket prospects and moved to a smaller, optimal
facility at the year end. The award of outline planning permission for the Hayward Tyler (“HT”) Luton site was good news,
providing us with the opportunity to optimise HT’s UK operations, whilst potentially producing a net surplus for the Group when
the site is exited. However, this process has been delayed by Covid-19.
The PSRE division pushed through the impact of Covid-19 and capped an excellent year with the successful disposal of Peter
Brotherhood. The division refined its offering to the UK nuclear market – especially to Sellafield for nuclear decommissioning
- whilst also using this capability to position itself for longer term new nuclear technologies. Post period end, we were delighted
to confirm the transition of the important 3M3 box contract with Sellafield to the volume production phase and with an enhanced
contract value, up by £20m to £70m. The integration of Booth has gone better than planned and the business is rapidly returning
to full heath, with a record order book, including the stellar £36m contract win with HS2. Covid-19 buffeted Ormandy more
than most in the financial year, but the business still turned out a decent result and we anticipate further improvements this year.
Meanwhile, the Medical and Industrial Imaging (MII) division has metamorphosed into a niche MRI player, following the
acquisition of a majority stake in Magnetica and its merger with Scientific Magnetics and Tecmag. This exciting development
has created a start-up MRI systems manufacturer, with eyes on alluring market prospects in orthopaedic and veterinary imaging,
for example. The refocused division will continue to produce associated products in nuclear magnetic resonance and scientific
magnets, in support of the core strategy. These developments are still at a relatively early stage, but the Board is excited about the
long-term potential of the division, which is expected to yield longer term positive returns for the Group, albeit perhaps using a
different vehicle to maximise returns than our usual “PIE” process for mature businesses.
Given the excellent overall results for the year, the Board believes that it is now right to reintroduce a full year dividend of 4.0
pence per share, which includes an element of catch up for the missing interim dividend, suspended due to Covid-19.
As well as the final dividend proposed, we intend to return to our commitment to long term shareholder returns in FY22, with
both interim and final dividend payments in prospect. Our resilient view of the overall prospects for the Group, underpinned by
our prudent approach to debt and financial headroom, support this decision. Given the robust balance sheet position, the Group
continues to seek further shareholder value enhancing M&A opportunities.
Finally, I warmly welcome all the staff at Magnetica to Avingtrans and congratulate them and all Avingtrans employees for the
dedication and determination that they have displayed in a challenging environment. We also wish our former colleagues at PB
well, as they continue their success story now as part of Howden. On behalf of the shareholders, I once again thank all Avingtrans
employees for their commitment to the Group during the past year, as we look forward with eagerness to FY22.
Roger McDowell
Chairman
28 September 2021
3
Strategic Report
Group Performance
Strategy and business summary
Group Strategy
Our core strategy is to buy and build engineering companies in niche markets, particularly where we see turnaround and
consolidation prospects; a strategy we call Pinpoint-Invest-Exit (“PIE”). We have had a strong track record in returning significant
shareholder value over the past decade and FY21 was another successful year, with the January 2021 acquisition of a majority
stake in Magnetica and the disposal of Peter Brotherhood in March 2021.
With an increased presence in our target markets, a focus on aftermarkets, strength in depth of the management teams and a lean
central structure, the Group continues to grow profitably – despite the effects of Covid-19 – and the Board is focused on seeking
additions to the Avingtrans value-add proposition.
The majority of the Group’s adjusted key financial metrics trended positively in the period, particularly in light of Covid-19 and
the effect of acquiring a start-up business during the year.
The Group is focused on the global Energy and Medical markets, both of which play into some of the world’s mega-trends, such
as: urbanisation; an ageing population; and an accelerating transition towards a cleaner and healthier planet.
Divisional Strategies
Engineered Pumps and Motors (Energy – EPM): EPM continues to develop its nuclear installed base (civil, defence and
national security) – notably for life extension applications – and its offering to the hydrocarbon market sectors. Energy Steel
in North America (acquired in June 2019), which specialises in nuclear life extension, continues to recover well. In addition,
the EPM business continues to develop solutions for new nuclear technologies and other low carbon energy sources, such as
concentrated solar, to capitalise on the global energy supply transition. During FY21, EPM delivered a number of key contracts,
including pumps for next generation nuclear business TerraPower in the USA and pumps for a major new concentrated solar
power plant in Dubai. Partnership agreements (eg with Ruhrpumpen and Shinhoo) are an important element of the EPM strategy,
providing us with a broader product portfolio and cross-selling opportunities.
Process Solutions and Rotating Equipment (Energy – PSRE): Here, the primary strategy is to develop a comprehensive
offering to the nuclear decommissioning and reprocessing markets, building on the long-term contracts to build nuclear waste
storage containers and the installed base of equipment across the vast Sellafield site. Post period end, Metalcraft and Sellafield
Limited entered into the second phase of the contract to provide high integrity stainless steel storage boxes for Sellafield. The
3M3 (‘three metre cubed’) box contract is now worth up to £70m, being a £20m uplift to the original contract awarded in
2015. During the year, the division’s nuclear credentials were enhanced by the strong recovery of Booth Industries, which also
broadened our market reach into Critical National Infrastructure (CNI). Amongst others, Booth won a major new multi-year
contract with HS2 in the period, worth £36m. The PSRE division is witnessing a strong pipeline and remains well poised to bid
for and capitalise on opportunities as they arise.
Medical and Industrial Imaging (Medical – MII): Following the Magnetica acquisition in January 2021, the focus for the
medical division pivoted towards becoming a niche market leader in the production of compact helium-free MRI systems, for
applications such as orthopaedic and veterinary imaging. This is an exciting opportunity for the Group. In parallel, we have
moved to exit from volume MRI components supply to customers such as Siemens, preferring to concentrate on our own product
development. In support of the core strategy, the division will continue to work on niche Nuclear Magnetic Resonance (NMR)
and scientific magnet products and services, since these are complementary technologies.
The common theme which we are seeking to develop across the energy and medical divisions, is the continued pressure on
aftermarket expenditure, where operational efficiency, reliability and safety are paramount and operators are looking to their
supply chain partners to provide long term support of both new infrastructure and legacy installations.
Pinpoint-Invest-Exit
Continuing our Pinpoint-Invest-Exit strategy, Avingtrans acquired a majority stake in Magnetica (AUS), in January 2021,
merging this with our other MRI related businesses, Scientific Magnetics (UK) and Tecmag (US). The objective is to create an
innovative niche MRI systems manufacturer, with the technology to drive new MRI imaging applications and business models.
To date the integration of the three businesses is on track and making good progress towards commercial product availability.
The integrations of FY20 acquisitions, Booth and Energy Steel, both went well during FY21 and they were each able to deliver
a profit for the Group, with Booth’s recovery being very robust and ahead of management’s expectations.
During the period, we obtained Outline Planning Permission (OPP) for the redevelopment of our HT Luton site, comprising up
to 1,000 residential units. Covid-19 has delayed our plans with respect to the site and discussions are ongoing.
4
Strategic Report (Continued)
Pinpoint-Invest-Exit (continued)
M&A activity in energy capital goods markets has been surprisingly robust despite Covid-19 and businesses like ours continue
to command high valuations. This was evidenced by the March 2021 disposal of Peter Brotherhood, which was acquired for
£9m, as part of the Hayward Tyler Group in 2017. The disposal was for £35m enterprise value – almost four times the price paid
for the business in a four year period. This demonstrates the validity of the PIE model and our approach to business turnaround.
Consequently, Avingtrans remains confident about the current strategic direction and potential future opportunities across its
chosen markets.
Markets – Energy
The global demand for energy experienced a hiatus, due to Covid-19, but we believe that we will see a consistent return to growth
now and the effect of the pandemic may be to drive faster towards increased efficiency and decarbonisation. This trend may
benefit our businesses in the nuclear and renewables sectors.
End User/Aftermarket
Operators and end-users demand a blend of quick response through local support and a requirement to drive improvements
through equipment upgrades and modernisation. In the West, where facilities are being operated for longer than their intended
design lives, there is a strong demand for solution providers in the supply chain to partner with end-users for the longer term. The
Avingtrans energy divisions are well positioned to grow in this end-user market space.
Nuclear
Nuclear energy as a low carbon, baseload power source remains an asymmetric market with respect to future growth. Almost all
the 1GW+ new build opportunities are currently in Asia, with the exception of the limited UK programme. However, we are still
experiencing buoyant market segments, including supporting the operational fleet, continued safe operation and life extensions,
decommissioning and reprocessing. We are also working on the long-term development of the next generation of technologies –
i.e. Small Modular (SMR), or Advanced Generation IV Reactors – eg with TerraPower. In addition, these segments all have the
backdrop of a consolidating supply chain and paucity of expert knowledge.
The USA still operates the biggest civil nuclear fleet in the world, with 94 reactors generating around 30 percent of the world’s
nuclear electricity. Coupled with the heritage Westinghouse technology operating in Europe and Asia, the EPM division’s long-
standing position in this market provides opportunities for further growth. Obsolescence and life extension are key issues for
nuclear operators worldwide and the Avingtrans Energy Divisions are well positioned to support operators in addressing this
critical risk. The acquisition of Energy Steel in the USA in 2019 further bolstered the Group’s capabilities in this regard.
The UK remains pre-eminent when it comes to decommissioning and reprocessing, in terms of innovative technology and
overall spend. The Group is embedded in the future manufacture of waste containers for Sellafield and will continue to expand
its presence in the UK and globally in the longer term. The development of new nuclear technologies is ongoing, with pockets of
activity in the UK, South Korea, the USA and China dominating development activity. The Group views these new technologies,
such as an attractive route forward for nuclear and is well positioned to develop as a global industry partner.
Power Generation
The world continues to electrify, with an increasing amount of primary energy going to the power sector, which remains a key
focus across the Group’s energy divisions. Aside from nuclear, the main sub-sectors are as follows:
• Coal – the Group continues to see good aftermarket activity from coal fired power stations even though the demand for new
power stations is in decline. Opportunities still exist in India, China, South East Asia, Eastern Europe and the Middle East.
EPM is optimising its product line, to take market share and to create tomorrow’s aftermarket.
• Gas – natural gas, primarily in the form of combined cycle gas turbine power plants is a growing market space, primarily in
the West. The Group is moving into this market with both existing and new product lines.
• Renewables – renewable technologies and their supporting infrastructure are a growing market globally. The Group has a
range of products that can be applied directly to this market segment and also has expertise that can be used to develop new
products for niche parts of this market, such as molten salt for concentrated solar applications.
Hydrocarbons
The Covid-19 pandemic had a dramatic effect on oil & gas supply and demand, with the Brent crude price collapsing in 2020 and
now trading in the range of $70 to $75 per barrel, with most informed forecasts suggesting an on-going recovery. As a result, new
capital expenditure in this sector was materially reduced and has not yet recovered to pre-covid levels. Therefore, our forecasts
must continue to exhibit prudence, with some limited restructuring activity in EPM being completed in the first half of FY21 in
response to the market conditions. However, aftermarket orders continue to be won, so there is some positive news in this area.
5
Strategic Report (Continued)
Markets – Energy (continued)
Digitalisation & Condition Monitoring
Companies across the energy market continue to invest in digital technologies to improve productivity, efficiency and predictability
in the field. At the equipment level this translates to a series of devices, sensors and algorithms which can predict breakdowns
before they occur and ensuring equipment is running at its optimum performance. The Group has continued to develop and refine
its capabilities in this regard, having launched its first monitoring product, DataHawkTM, three years ago.
Markets – Medical
The Diagnostic (medical) and molecular imaging markets are large global sectors, dominated by a few large systems
manufacturers. The total Diagnostic Imaging Market will be worth $33.5bn by 2024, according to Markets and Markets and is
expected to continue to grow at over 5% per annum over that period. The largest market is the USA, followed by Europe and
Japan. The fastest growing markets are China and India.
Following the acquisition of a majority stake in Magnetica (AUS) in January 2021, we merged Magnetica with Scientific Magnetics
(UK) and Tecmag (US). The objective of this pivot is to create an innovative, niche-MRI systems supplier, which can address
specific parts of the market, not well served by dedicated products at present. This includes orthopaedic and veterinary imaging.
Although Magnetica is primarily targeting the Magnetic Resonance Imaging (MRI) market, Nuclear Magnetic Resonance
(NMR) continues to be of interest, due to the common thread requirements for superconducting magnets and cryogenics. These
two segments account for approximately 85% of our business in the medical division. Market drivers for these segments include
an ageing global population and the global pharmaceutical industry’s research needs.
MRI itself is approximately 18% by value of the total diagnostic Imaging market and is projected to grow at 6% p.a. (Grand View
Research). NMR is a smaller market, currently estimated at $861m p.a. by Marketwatch and is projected to grow at over 3% p.a.
until 2026, with Bruker enjoying a dominant market share.
End User/Aftermarket
The MRI market segment is dominated by a handful of manufacturers, including GE, Siemens, Philips and Canon, who account
for circa 80% of revenue globally. These players also dominate the aftermarket, though there are a few independent MRI service
businesses in existence. Avingtrans is not present in the MRI aftermarket at this time.
The NMR market is similar, currently dominated by Bruker and Jeol. Avingtrans is aligned with MR Resources Inc, a well-
established US business, which services the NMR aftermarket.
MRI
As noted above, the MRI market segment is dominated by a handful of global manufacturers, and we do not intend to compete
with them. However, following the planned pivot to niche full system supply noted above, Avingtrans has moved in parallel to
exit component supply and this process has advanced materially in the year. We anticipate a temporary reduction in divisional
revenues, as component manufacture ends, since there will then be a gap before we launch our own systems. Our first target is
orthopaedic imaging, where encouraging development of our prototype system is on-going. We currently anticipate commercial
launch of this product during 2023, subject to regulatory approval in target markets.
NMR
We are aligned with recent market entrant Q One Instruments, China and also with MR Resources of the USA, as noted above.
Together, we form an alliance to challenge the dominance of the existing players and to provide customers with an additional
source for NMR products, service and support.
Operations
Operational Key Performance Indicators (KPI’s)for continuing operations
• Percentage of total continuing revenue deriving from aftermarket (AM) sales (%)
• Customer quality – defect free deliveries (%)
• Customer on-time in-full deliveries (%)
• Annualised staff turnover including restructuring (%)
• Health, Safety and Environment incidents per head per annum
2021
41.4
98.9
69.8
22.0
0.07
2020
42.7
98.0
78.1
14.6
0.09
The AM sales % has reduced marginally. This is mainly due to the lack of access to US nuclear plants, caused by Covid-19.
Covid-19 delays also continued to affect AM order timings – especially at EPM, in the nuclear aftermarket. For customer quality,
we sustained our usual high level of defect free deliveries, though on time deliveries fell back in the year, again due to Covid-19
6
Strategic Report (Continued)
Operations (continued)
induced supply chain disruption Annualised staff turnover increased, due to restructuring at EPM (caused by Covid-19 effects on
the oil and gas market) and at Metalcraft (driven by our exit from the MRI component manufacturing business). The long-term
positive reduction of HSE incidents continues, though each new acquisition presents us with fresh HSE challenges.
EPM Division – Energy
For the EPM division, which represents the bulk of the former Hayward Tyler companies, the main priorities remain to strengthen
the aftermarket capabilities and to maximise opportunities in the nuclear life extension market.
The division’s results improved in the period, having been disrupted by Covid-19 in the prior year. Whilst some adverse Covid-19
effects lingered into FY21, the impact was less pronounced than previously, so EPM was able to make headway once more.
At HT Luton, a targeted, largely voluntary, restructuring programme was implemented early in the period. This was necessary
because Covid-19 badly disrupted the market for new capex into oil and gas. However, aftermarket activities continue to build,
including the servicing of third party equipment. The £10m contract in Sweden with Vattenfall for the Forsmark plant (for nuclear
life extension) made good progress overall and is expected to complete in FY22. Further defence orders have been received
and are being executed on target. Following the receipt of planning permission to develop the HT Luton site into up to 1,000
dwellings in the period, plans are underway to move the business to a new, optimised location, although this process was also
delayed by Covid-19 effects outside of our control.
HT Inc in Vermont (USA) continues to see solid order intake in the nuclear life extension market in the USA - and again with
KHNP, South Korea, although delays in order intake (due to Covid-19 affecting customer site access) did impact the US results
again. HT Inc’s new R&D opportunities - in next generation nuclear power and concentrated solar power - are also making good
progress, with first products shipped to TerraPower in the period.
HT Kunshan (China) delivered their contract in China (worth £2.2m) in the period for specialist pumps being installed in a major
new concentrated solar power plant in Dubai. This renewables market sector has several good prospects for follow-on from this
initial win.
HT India continued to suffer from order and delivery delays and disruptions due to Covid-19, but the business was still able to
record a modest profit in the period.
Energy Steel (‘ES’) in Michigan (USA), continued to progress on its recovery path, chalking up another small profit, in the
period. Importantly, at the end of the year, ES completed a move to a new smaller facility, thus reducing overheads going forward
and rightsizing its capacity. The integration of sale with HTI is now complete and the business has started to win new orders from
previously untapped customers, including orders deriving from a nuclear “orphan” IP acquisition.
PSRE Division – Energy, safety and security
PSRE had another very good year, helped along by the successful disposal of PB for £35m enterprise value in March 2021. The
results of the continuing businesses were supported by a strong recovery at Booth, which now has a record order book, including
the HS2 £36m contract awarded in the period. Booth also made progress with its factory extension, though construction was
delayed materially by Covid-19. The blast and security high integrity doors niche which Booth occupies, is one which we can
defend vigorously, to rebuild Booth into a leader in its chosen markets, both in the UK and now internationally.
Metalcraft’s progress with the Sellafield 3M3 boxes was again steady- and our progress was rewarded (post period end) by
the confirmation by Sellafield of our transition to phase two of the box contract. The contract value was also boosted to £70m
(previously £50m) with circa 1000 boxes to be delivered over the next six years. Metalcraft is the only supplier to transition to
phase two of the contract. The next 3M3 box contract tender has now been even further delayed due to Covid-19 disruptions to
Sellafield’s plans. This delay is disappointing, but we are now very well placed to pursue this contract later and it does not impact
on our forecasts, which allow for unexpected customer delays.
Ormandy’s performance was pleasing in the year, since it was more disrupted by Covid-19 than other business units. Nonetheless,
the HVAC market held up and a strengthened sales team improved results and the business is well-placed for the future.
The Fluid Handling business in Scotland is a consistently good performer and continues to build a wider nuclear capability. In
the period, this unit won its biggest ever order (£2.5m) for Sellafield, to repair and upgrade remotely monitored valves. Further
life extension and decommissioning opportunities are being pursued. Post period end, a contract worth £4.4m was secured with
Doosan, as a prime contractor for Sellafield. This was notable, because it required Fluid Handling, to work with Metalcraft and
HT Luton, to secure the order.
MII – Medical Division
MII is a division in pro-active transition. We have been pivoted away from the custom business previously targeted by Scientific
Magnetics (SM) and working towards new products in Magnetic Resonance Imaging (MRI), driven by the acquisition of a
majority stake in Magnetica (MNA) in January 2021. With MNA, SM and Tecmag now all integrating as one business, the focus
is fully on niche-MRI systems and we are making good progress on this exciting major project.
7
Strategic Report (Continued)
Operations (continued)
MII – Medical Division (continued)
MNA will continue to work on products for the adjunct Nuclear Magnetic Resonance (NMR) market, including service and
support offerings with our third party partners.
In parallel with our pivot to MRI systems, Metalcraft’s UK and China business for MRI components was being gradually wound
down and this process will conclude in FY22. Therefore, the remainder of this operation has recombined with its sister unit in
PSRE, to simplify reporting there.
Composite Products had a good year, with increasing deliveries to Rapiscan for package scanning equipment and the development
of other customers, such as Arrival for electric vehicle composite components. Again, due to the focus on MRI in the medical
division, it is now a better fit for Composite products to move into the PSRE division.
Financial Performance
Key Performance Indicators
The Group uses a number of financial key performance indicators to monitor the business, as set out below (all items are “from
continuing operations” after restating for discontinued PB).
Revenue: 7.1% increase – good underlying organic growth
Overall Group continuing revenue increased to £98.5m (2020: £92.0m), driven by organic growth in the EPM and PSRE divisions
and despite some on-going contract delays caused by Covid-19.
Profit margin: another significant improvement in results, despite Covid-19
Adjusted EBITDA (note 4) increased by 78.5% to £12.5m (2020: £7.0m). PSRE was boosted by strong results across the
division and a robust return to profit at Booth. The profit margins in the EPM division also continued to improve, following some
restructuring caused by the Covid-19 impact on oil and gas markets.
Operating profit was £6.1m (2020: profit £0.6m), in line with the EBITDA improvement seen above.
Gross margin: strong progress, with Booth now contributing positively
Group gross margin improved to 30.4% (2020: 26.8%) due to the improving gross margin mix from the former HTG business
units and the recovery at Booth, as our transformation programme continues to bear fruit.
Tax: future profits and cash protected by available losses
The effective rate of taxation at Group level was a 7.0% tax charge. A tax refund (note 9) due in the US kept the charge lower than
expected and the use of brought forward losses in the UK. The tax position will be aided further in the coming years by utilisation
of losses in the UK and China. We continue to be cautious, not recognising all of the potential trading tax losses in the UK.
Adjusted diluted Earnings per Share (EPS): a 181% improvement
Adjusted diluted earnings per share from continuing operations (note 11) was boosted to 22.4p (2020: 8.0p) reflecting the
underlying growth in results and PB being restated as a discontinued operation. Including 73.9p from the disposal of PB and
discontinued operations resulted in Adjusted diluted earnings per share attributable to Shareholders of 96.2p (2020: 16.2p).
Basic and diluted earnings per share attributable to Shareholders increased to 85.4p (2020: 4.4p) and to 83.6p (2020: 4.3p).
Funding and Liquidity: substantial net cash position, following Peter Brotherhood disposal
Net cash (including IFRS16 debt) at 31 May 2021 was £20.3m excluding IFRS16 debt, net cash was £23.3m (31 May 2020: net
debt: £16.4m excluding IFRS16 debt at 31 May 2020 was £7.4m). The cash flows generated from the strong underlying profits
were partly absorbed by a £2.2m working capital outflow, partly due to the envisaged further working capital outflow for the ES
and Booth acquisitions, the timing of various contracts and a lower level of advance payments, resulting in an operating cash
inflow of £6.4m for the year (2020 outflow £0.1m). In addition the cash inflow£26.6m (net of disposal costs) generated on the
disposal of PB meant the Group moved into a substantial net cash position. The Directors consider that the Group has sufficient
financial resources to deliver strategy, so the Group is actively looking for further value enhancing opportunities.
8
Strategic Report (Continued)
Dividend: full year progressive dividend reinstated
The Board believes that it is now appropriate to reinstate the full year dividend and proposes a dividend of 4.0p per share (2020:
Nil p – suspended due to Covid-19). We return to our commitment to long term shareholder returns via dividends from this year
and we also intend to reinstate progressive interim and final dividends for FY22. The dividend will be paid on 10 December 2021
to shareholders on the register at 29 October 2021.
Principal risks and uncertainties facing the Group
Managing Risk
The Group is exposed to risks and uncertainties that could have a material impact on its performance and financial position.
Identifying, assessing and managing risk is the responsibility of the Board. Our approach to risk is intended to protect the
interests of our shareholders and other stakeholders whilst allowing the business to develop. Our risk appetite depends on the
nature of an individual risk, and it is considered in Board discussions and also as part of our risk review process in the Audit
Committee. From time to time, we obtain advice from third party experts in a cost effective manner, to complement in-house
knowledge.
The long-term success of the Group relies, in part, on managing the risks to our business. Whilst the Group has risk management
policies and practices in place, which address and monitor risk, we seek to improve those practices each year. The Chief Financial
Officer is responsible for risk management on behalf of the Board and the Audit Committee and he reviews the risk register on a
regular basis. Ultimately our aim is to ensure that risk management is embedded within the core processes of our business units.
Risk Management Process
The Group uses a risk register to help coordinate its risk management process. The risk register identifies the key business risks
and documents the policies and practices in place to mitigate those risks.
Principal Risks
We classify the risks to the business into three groups, namely, strategic risk, operational risk and financial risk. The principal
risks identified by the Directors under these groups are set out in the table below. The risks considered during the Group-wide
risk management process cover a wider range of issues than the key risks that are listed in this table.
Risk
Potential Impact
Mitigation
Strategic Risk
A. Covid-19
effects across
the global
economy and
businesses
The ongoing risks faced by the
Group due to Covid-19 are possible
delays in the ability to ship work
when complete, delays in the supply
chain, and delays in the ability to
visit customer sites to complete
work, delays in customer’s decision
making on projects.
enhance
The ongoing
reoccurrence of
restricted activity could compound
and
principal
risks, not least general economic
conditions, delays in client decision
making or additional costs resulting
from delay.
other
As part of its processes the directors conduct a series of
sensitivity analyses to a range of scenarios arising from the
effects of Covid-19 on the business, its staff, customers and
other stakeholders.
A number of responses and mitigation actions continue to be
taken by the Group including focussed customer relationship
management, continual sales and operational planning, supply
chain management, process and capacity mapping, resource
and staffing risk review, updated review of health and safety in
the working environment and focused cash management.
This forms part of the group’s routine processes alongside the
Going Concern assessment set out in the Director’s Reports.
9
Strategic Report (Continued)
Principal risks and uncertainties facing the Group (continued)
Risk
Potential Impact
Mitigation
Strategic Risk
B. Growth
Strategy
is growth
A fundamental part of the Group’s
strategy
from both
Original Equipment and Aftermarket
sales. The growth is reliant on our
markets. These markets demonstrate
long-term growth but remain highly
competitive and can be cyclic.
Failure to generate sufficient order
intake and revenue to cover the
fixed cost base could give rise to
lower profit and cash generation that
constrains the Group.
to
keep-up
Failure
with
technological change could give rise
to the Group’s products, services
and
less
technologies becoming
competitive.
C. PIE Strategy
mergers,
acquisitions
and disposals
The Group makes
regular
acquisitions and disposals under
its PIE strategy. In January 2021,
it merged its assets with that of
Magnetica, holding a residual 58%
of the larger sub group. During
the period, we disposed of Peter
Brotherhood Limited.
Failure to re-establish and rebuild
these businesses could (1) absorb a
disproportionate part of management
resource at the expense of other parts
of the Group (2) reduce the Group’s
profitability and (3) delay the cycle
of the planned positive outcome of
the PIE strategy.
D. Execution
services highly
The Group designs, manufactures
and
technical
products that are mission critical to
the end user.
to
satisfy
contractual
Failure
to
rise
obligations could give
significant
losses (e.g. warranty
claims, liquidated damages, etc),
cash constraints, lost future orders
and adverse impact on the Group’s
reputation.
The Group provides niche engineering solutions for the global
energy and medical sectors. It has an excellent market profile
(quality, reliability and customer relationships), which results
in inclusion on sector bid/quote opportunities.
The Group has invested, and is investing, in key aspects to
maintain and improve the Group’s competitive position
including:
■ employees (see F below);
■ supply chain (see G below);
■ developing and maintaining strong relationships with key
customers;
■ capital expenditure on plant and equipment;
■ research and development of products and processes and
■ aftermarket initiatives including supporting end-of-life
extension programmes.
The Group carefully plans acquisition actions to mitigate this
risk:
■ extensive pre-deal due diligence;
■ achieving a balance between attractive purchase prices and
business purchase agreement terms and conditions;
■ post-acquisition integration planning
■ rapid business restructuring as required
■ appropriate funding of the acquisitions and on-going
businesses followed by de-leveraging the business;
■ establishing senior management teams, complemented by
experienced executives from Avingtrans and externally, if
required;
■ development of incoming employees;
■ focusing on marketing and sales including growing
aftermarket businesses; and
■ investing in the businesses as necessary for a successful
outcome to the PIE strategy.
The Group continues to invest consistently in its people,
processes and products to maintain and improve lead times and
product innovation. These steps include: enhanced customer
relationship management, sales and operational planning,
process flow mapping, research and development, product
standardisation and enhancing process capability.
The Group also seeks to minimise the impact of execution risk
through its terms of trade such as (1) limiting the undertakings it
gives to pay liquidated damages and (2) avoiding consequential
damages altogether.
10
Strategic Report (Continued)
Principal risks and uncertainties facing the Group (continued)
Risk
Potential Impact
Mitigation
Strategic Risk
E. Global
Economic
Activity and
political
uncertainties
including
Brexit
F. Employees
Operational Risk
G. Supply
Chain
The Group operates in global energy,
industrial, defence,
infrastructure
and medical markets. A slowdown in
those markets including the possible
impact from on-going economic and
political uncertainty may adversely
impact order intake, liquidity needs,
and terms of trade and the financial
performance of the Group.
Political uncertainty such as the
impact of Brexit and other overseas
trade issues – eg US trade tariffs can
affect decisions by our customers to
invest and therefore impact on our
trading.
Attracting and retaining talented
people is a Group priority to ensure
our continued success. The Group
has numerous skilled and highly
trained and qualified employees
who demonstrate their commitment
to the Group through the continuous
improvement of our products,
processes and procedures which
impacts on the Group’s performance.
Failure to attract the right talent,
could inhibit the rate of product
and process development as well as
impact on the Group’s performance.
The Group is reliant on its supply
chain as part of its aim to improve
throughout and optimise stock-
holding.
Failure of that supply chain can
result in operational disruption and
delays to shipments to customers,
leading to potential loss of profit and
damage to customer relationships.
The Group has a diversified geographical and sector spread that
reduces the impact of localised economic trends and activities.
In addition, the Group is investing in research and development,
to develop new products or adapt existing products for use in
other applications in order to broaden its product offering, to
reduce the risk. Increasing aftermarket activities also provide
the Group with a partial cushion to defend against cyclical
downturns in original equipment purchasing.
We continue to review and assess the potential impacts of
US and Chinese tariffs and Brexit clarifications, as more
information becomes available and we are engaged with trade
associations, which are in contact with government and can
thus assist our decision making and action plans.
The Group has been able to continue to trade with EU member
states and takes guidance on any new trading regulations. The
Group also operates in countries which are outside of the EU
which helps to lessen the impact of disruption caused.
Recruitment and retention of employees is a key focus for the
Group to ensure its continued success.
Group mitigating actions include:
■ continuing the significant investment in training and
development;
■ personal development reviews;
■ succession planning;
■ promotion from within where possible
■ outreach to Universities, Colleges and Local Schools;
■ monitoring pay and benchmarking;
■ maintaining the successful graduate and apprentice
programmes;
■ improving overall employee engagement; and
■ utilisation of external and Group resource to offset any
temporary gaps in key personnel.
Each division has its own sourcing policy. Where appropriate
and efficient, divisions cooperate on sourcing. Mitigating
actions include:
■ sourcing strategies to avoid single point dependence for
any key commodity and standardisation to support possible
stock holdings;
■ identifying in-house capability (intra and inter-divisionally)
and focused investment in related capital expenditure;
■ exception reporting, operational planning and review
processes support the early identification of risks;
■ monitoring of supplier performance;
■ an optimum number of suppliers with strategic, long-term
partnerships on key components;
■ strengthening of supply chain teams; and
■ supply chain benchmarking and development.
11
Strategic Report (Continued)
Principal risks and uncertainties facing the Group (continued)
Risk
Potential Impact
Mitigation
Financial Risk
H. Funding
The Group is dependent on its ability
to service its debts and refinance
existing borrowings when
they
fall due as well as to fund working
capital, capital expenditure, and
research and development.
If the Group fails to generate profits
and cash it could face funding
constraints that impact the business
cycle.
I. Working
Capital
As a fundamental part of the Group’s
strategy is growth the Group is
exposed to a potential increase in
its working capital requirement
that absorbs cash. If the Group fails
to keep this increase under control
it could face cash constraints that
impact the business cycle.
J. Currency
The Group operates and sells in
overseas markets that may utilise
currencies other than those in which
its principal costs are denominated.
The exposure to foreign exchange
rate fluctuations may, as a result,
affect the Group’s cash flow. The
principal risk at present is US Dollar
income.
The Group manages its capital to continue as a going concern
and maintain its liquidity. The Group continually reforecasts
its borrowing requirements, which include:
■ a 13-week cash flow forecast produced each month; and
■ a 12-month rolling profit and loss, balance sheet and cash
flow forecast each quarter to ensure that funding is
available to support its operations and its compliance with
borrowing covenants.
The Group maintains committed UK and US bank credit
facilities, augmented by specific funding to support investment
globally and a bonding facility. In addition, the Group
maintains an active bank relationship programme and contacts
with UK Export Finance, to safeguard its funding ability.
The Group is seeking to mitigate this risk through the following
means:
■ standard terms and conditions of manufacturing contracts
require customers to make stage payments to fund working
capital on the contract. Where stage payments cannot
be achieved by the Group, it may be possible to augment
borrowing and bonding lines through use of the short-term
funding schemes – eg via UK Export Finance;
■ an on-going initiative to optimise stock;
■ minimising lead times, to reduce working capital
requirements per unit of revenue;
■ active management of accounts receivable and accounts
payable; and
■ linking employee remuneration to cash.
The Group’s policy is to hedge its transaction exposures (i.e.
cash flows) where a significant commitment has been made
and a level of cover for non-contracted flows in the 12 to 24
month period. As at date of signing, 89% of estimated USD
net inflows into the UK over the following 12 months were
hedged.
Currency hedging lines are available from two providers.
12
Strategic Report (Continued)
Principal risks and uncertainties facing the Group (continued)
Risk
Potential Impact
Mitigation
Financial Risk
K. Pension
Scheme
The Group maintains a defined
benefit pension scheme related to
the Hayward Tyler businesses.
The Group could be required to
increase its contributions to cover
funding shortfalls caused by poor
investment performance of scheme
assets, a deterioration in the discount
rate or inflation rate applied and
life expectancy of
in
changes
members of the scheme.
L. Customer
Credit
Exposure
The group may offer credit terms to
its customers which allow payment
of the debt after delivery of the
goods or services. The group is at
risk to the extent that a customer
may be unable to pay the debt on the
specified due date.
The scheme is closed to new members and to future benefit
improvements. The performance of the investment advisers is
monitored closely by the Company and pension trustees and
action taken where that is not satisfactory. The assumptions
used to determine the pension deficit/surplus are based on
recommendations of the actuary to the scheme, benchmarked
against market norms by an expert 3rd party. The Directors
discuss the pension scheme regularly and there is frequent
contact with the pension fund trustees.
The aim is to strengthen the financial position of the
Group, through its underlying performance, which assures
stakeholders and helps to maintain or reduce contributions to
cover any eventual funding shortfall.
The plan trustees have selected a liability driven investment
strategy aimed at reducing interest and inflation rate risks
and providing a return that matches or exceeds the growth in
projected pension plan liabilities.
This risk is mitigated by the strong on-going customer
relationships. See note 24 for more detail.
People
There were no changes at Board level in the period. Top level divisional management teams were largely unchanged.
The management teams in each of the three divisions continue to be strengthened, with a number of key appointments being
made in the year. The recruitment emphasis remains on the importance of the aftermarket opportunities. Skills availability is
always a challenge, more so after Brexit and the effects of Covid-19. However, we do not expect to be unduly constrained by
shortages, given the global economic situation. The Group continues to invest significant effort in developing skills in-house,
through structured apprenticeship programmes and graduate development plans.
Our workforce is becoming ever more integrated and this provides additional capability, capacity and innovative thinking, to
support our global blue-chip customer base.
Section 172 statement
Background The Board of Avingtrans has put in place appropriate measures to enable it to understand and comply with its shared
and individual responsibilities under Section 172 of the Companies Act 2016. Each director understands their obligation to act
in a way they consider is in good faith and would be most likely to promote the success of the Company for the benefit of its
members as a whole. In making decisions on behalf of the Company, Board members carefully consider:
•
•
•
•
•
•
the likely consequences of any decision in the long term;
the interests of the Company’s employees;
the need to proactively foster the Company’s business relationships with suppliers, customers and others;
the impact of the Company’s operations on local communities and the environment;
the desirability of the Company maintaining a reputation for high standards of business conduct; and
the need to act fairly between members and stakeholders of the Company.
13
Strategic Report (Continued)
Section 172 statement (continued)
Appropriate decision making
The Board is given regular information concerning the Company’s and Group’s performance ahead of each Board meeting, along
with projections for the future – to assist in the overall planning process - and presentations from business units. Decisions regarding
the business (including strategy, market position, investment opportunities, M&A activity, senior management appointments etc.)
are fully considered and discussed openly between board members, taking account of each of the considerations listed above.
The Board seeks to understand the views and needs of the Group’s key stakeholders, to ensure that consideration for all our
stakeholder groups is taken account of when decisions are made and to address their long-term needs and concerns. Where there
may be competing priorities, the Board considers the commercial, human and broader business impacts against the longer-term
sustainability of the business.
The balance and experience of the Board to make appropriate decisions is regularly reviewed, as set out in the Corporate
Governance Report, specifically principles five and six.
Stakeholders
Avingtrans has identified its main Stakeholders as being its:
•
•
•
•
shareholders;
customers and suppliers;
employees; and
the wider communities we operate within
Engaging with our stakeholders strengthens our relationships and helps us to make better business decisions and deliver on our
commitments. The Board is regularly updated on feedback from wider stakeholder engagement, to stay abreast of the issues
that matter most to them and our business, and to enable the board to understand and consider these issues in any decisions
made. Details can be found in the Corporate Governance Report, specifically principles two and three regarding stakeholder
engagement.
Key decisions made during the period
During FY21, several decisions were made about the strategy, structure and future of the business. Examples of these key
decisions relate to:
• Disposal of Peter Brotherhood
• Acquisition of Magnetica
• Development of a training school at Stainless Metalcraft
• Group restructuring
• Appointment of VOX Markets
Disposal of Peter Brotherhood
The Board’s established core Pinpoint-Invest-Exit (“PIE”) strategy, to buy and build engineering companies in niche markets,
seeks to promote long-term value.
As part of this Strategy, it is acknowledged that after a suitable period of turnaround and improvement activity, that it could
be appropriate to move businesses on to a more focused parent, enabling the Group to further develop opportunities for its
Stakeholders.
Following an approach for Peter Brotherhood (PB), the Board considered the impacts of a disposal on key customers and ongoing
contracts, employees and the Group’s wider business direction. This culminated in agreement of the disposal to Howden, who
are specialists in the Steam Turbine and compressor market with wider market penetration and an ability to take PB to the next
stage of its development.
This enabled the Board to strengthen the balance sheet in a period of global instability and to provide funds to further the PIE
strategy, by turning around and improving underperforming businesses, to the benefit of all stakeholders concerned.
Acquisition of Magnetica
In order to accelerate the development of the Medical division and its compact helium-free MRI technology, the Board considered
the merger with Australian based Magnetica. Both businesses operated in the market with complementary technology, such that
the combined business could manufacture complete MRI scanners, with the added advantage of being 100% helium free, thus
eliminating the consumption of a scarce and non-renewable commodity.
During the acquisition process, representatives from both companies worked closely together to look at stakeholder management
across both businesses – putting in place internal and external day one and ongoing communications plans, considering integration
scope and timing, and working together to ensure a shared approach to the transition. Key customers, employee factors, and
service delivery were managed carefully, to ensure impacts were minimised. This merger could drive the development of lower
cost, helium-free, high integrity MRI technology ensuring clinical interoperability for imaging extremities. Using helium-free
14
Strategic Report (Continued)
Section 172 statement (continued)
technology should facilitate an expansion in potential to locate systems in more local facilities, by eliminating infrastructure
costs. This could allow repurposing of whole-body scanners to more appropriate imaging tasks and through targeted use of AI,
free-up radiologists’ time and capacity.
Development the training school at Stainless Metalcraft
During the year the Board considered the further development of the Stainless Metalcraft training school. Through its
apprenticeship programme it has provided training for local people for more than 100 years, with half its senior management
team beginning their own careers as apprentices. Metalcraft has been recognised with the Queen’s Award for Enterprise, for
Creating Opportunity through Social Mobility.
The training school is part of a longer-term ambition to create an advanced manufacturing innovation launchpad in Chatteris
and is aligned with the aim of the Combined Authority’s Local Industrial Strategy, to promote growth in the sector and to create
valuable employment opportunities.
The key to “levelling-up”, is skills and the Board is committed to supporting the creation of rewarding, long-term careers in the
local area, with the new training school playing a key part in realising that vision – not only for Metalcraft, but also by creating
training capacity for other employers in the region.
Restructuring
Due to the CV-19 pandemic and revisions to the UK’s Energy Policy on the use of hydrocarbons, the Board considered
restructuring, in particular in the EPM division, which has the highest level of exposure this Market.
The Board carefully considered the impact of this restructuring on its stakeholders and particularly its employees in EPM and
across the Group. Once determined that swift action was required in the best interest of all Stakeholders, the Board ensured that
appropriate communications plans and other measures were put in place, to enable the successful completion of the restructuring
on a timely basis and with appropriate consideration for employees who left the Group in the process.
Appointment of Vox Markets
The Board maintains an active dialogue with both its institutional and private investors and stakeholders as set out in the
Corporate Governance Report principle ten.
Following market feedback, the Board considered how it could improve communications with smaller shareholders. It decided
that Vox Markets, through appropriate communications e-channels, would be able to facilitate wider and more regular briefings,
especially for retail investors.
Section 172 Summary
Overall, the Board consider that the Company’s approach to compliance with Section 172 is appropriate for an organisation of
our size and the breadth and nature of stakeholders we have.
Where significant decisions are made, a key element of the decision-making process is how each of the key stakeholders may be
impacted. The Board ensures that the needs of shareholders are balanced with those of our customers and suppliers, and those of
our employees, by carefully considering the impact (positive and negative) of such decisions.
Alongside a healthy approach to risk management, our policies and ways of working are intended to drive an appropriate balance
of risk and reward across the business. Combining our Core Values and Code of Conduct into our decision-making, we can drive
a Company/Group culture, which aligns to the key requirements of S172, delivering benefit to all Stakeholders.
Environmental, Social and Governance (ESG) Report
Avingtrans believe that operating in a safe, ethical and responsible manner is at the heart of creating sustainable value for all our
stakeholders.
Our goal is to embed sustainability into our pinpoint-invest-exit business strategy. In 2021, we have reassessed our approach to
sustainability with a view of integrating a sustainability strategy within our core business activities, aligning ourselves with the
UN’s Sustainable Development Goals (SDGs).
The SDGs set out the UN agenda for people, planet and prosperity, aim to achieve a prosperous, inclusive and sustainable society
for all by 2030.
The SDGs provide all businesses with a new lens through which to translate the world’s needs and ambitions into business
solutions. These solutions will enable companies to better manage their risks, anticipate consumer demand, build positions in
growth markets, secure access to resources, and strengthen their supply chains, while moving the world towards a sustainable
and inclusive development path.
15
Strategic Report (Continued)
Environmental, Social and Governance (ESG) Report (continued)
We have reviewed the SDGs alongside our operations and consider the following to be our priorities:
• Health, safety, and wellbeing
• Operational eco-efficiency
• Development of new technologies
Environmental
The Group’s environmental policy is to ensure that we understand and effectively manage the actual and potential environmental
impact of our activities. Our operations are conducted such that we comply with all legal requirements relating to the environment
in all areas where we carry out our business.
During the period covered by this report, the Group has not incurred any significant fines or penalties, nor been investigated for
any significant breach of Environmental regulations.
Statement of carbon emissions – compliance with Streamlined Energy and Carbon Reporting (SECR)
This is our first year of carbon reporting emissions under the SECR regime. The group have elected to voluntarily disclose the
carbon reporting emissions under the SECR regime to provide stakeholders with a clear understanding of the group’s position
with regards to carbon emissions. In the year we have captured energy use across our UK sites and it is our intention to include
all remaining (overseas) entities in our next annual report.
The Avingtrans business model is Pinpoint, Invest, Exit with most businesses sold within a three to five year time frame. As a
result of our business model we expect to see significant fluctuation in energy use each year.
The methodology for this assessment has used the 2020 and 2021 emission conversion factors published by Department for
Environment, Food and Rural Affairs and the Department for Business, Energy & Industrial Strategy. The assessment follows
the location-based approach for assessing emissions from electricity usage and has used the UK electricity emissions factors (for
generation and transmission and distribution).
The data in the tables below is drawn from our 7 locations in the UK. Carbon reporting is aligned to our financial statements,
consequently we have excluded the results from our discontinued operations.
The following highlights Avingtrans’ emissions and intensity ratios:
Scope 1:
Gas
Oil
Distribution
Company car travel
Scope 2 – Purchased electricity
Total emissions tCO2e
Total energy consumption kWh
Intensity metrics:
Employees – UK sites
Emissions tCO2e per employee
Revenue (£m) – UK sites
Emissions tCO2e £m of revenue
2021
714
471
103
3
1,291
1,119
2,410
11,270,821
423
5.7
60.0
40.2
Given the disruption to the operations in the year resulting from the covid-19 pandemic (and this being the first year of reliable
data capture) we have not set Group goals at this point. A number of our sites that hold the ISO 14001 environmental standard
are already working towards achieving their site-specific goals.
16
Strategic Report (Continued)
Environmental (continued)
Operational eco-efficiency
Operational eco-efficiency plays a key role in our business. It supports our plan to maximise profitability, strengthen our
competitive position, and provide customers with the highest quality of services. Our efforts to reduce energy use and prevent
pollution also support our commitment to our employees, the environment, and the communities in which we are a part.
ISO 14001 Environment Management Systems
During the year Hayward Tyler China achieved the ISO14001 Environmental Management Systems accreditation, bringing
the total number of our sites with this accreditation to 6. This accreditation ensures that our businesses are focused on their
environmental impact, supported by effective management processes.
LED lighting systems
A significant proportion of our sites’ energy consumption is spent on lighting. We have been installing energy efficient LED
lighting systems across several of our sites. As well as improved lighting efficiency, brighter lights improve employee safety, and
provide improved monitoring. At our latest installation, we expect the new lighting to give 50% efficiency improvements on the
previous lighting, plus we expect further improvements to be derived from the smart monitoring systems.
On-site power generation
On site power generation can significantly reduce the environmental impact compared to purchasing power from the grid.
At Peter Brotherhood, we installed a Combined Heat & Power unit. The system burns natural gas to produce electricity and the
excess heat is used to warm the building and can be converted and used for air conditioning. Excess electricity is sold back to the
grid. Following the disposal of PB, we are considering whether this option is appropriate for other sites.
The significant footprint on some of our sites provides a good opportunity for solar power. Our Luton business has already
installed a solar array to generate on site power there.
Development of new technologies
Next generation nuclear power: Small Modular Reactors (“SMRs”)
SMRs are advanced power plants that can be largely built in factories as modules to minimise costly on-site construction, and
which allow manufacturers to reduce costs by producing many identical units. More than 70 designs of small modular reactor
are in development in 18 countries around the world, mostly based on Gen III+ reactor technologies which are relatively close
to commercial readiness.
The UK arm of our Hayward Tyler business is collaborating with the Nuclear Advanced Manufacturing Research Centre to
develop a new reactor coolant pumps (RCP) for small modular reactors (SMRs) and help the UK supply chain prepare to produce
critical components for the global SMR market.
Next generation nuclear power: Molten Chloride Fast Reactor (“MCFR”)
Our US Hayward Tyler business has developed high-temperature molten salt pumps destined for a state-of-the-art Integrated
Effects Test (IET) facility, under development by Southern Company and TerraPower to advance development of the Molten
Chloride Fast Reactor (MCFR). This is a transformational, fourth-generation, molten salt nuclear technology, designed to
enable low-cost, economywide decarbonization. Located at TerraPower’s Everett, Washington facility, the IET is a non-nuclear,
externally heated multi-loop system intended to test and validate integrated operation of MCFR systems as well as demonstrate
multiple auxiliary MCFR functions.
17
Strategic Report (Continued)
Environmental (continued)
From fission to fusion
The giant fusion reactor, currently under construction in France (ITER) will be used as a global demonstrator of fusion
technologies, in the lead up to eventual full-scale fusion power plants. Like nuclear fission, fusion is free of carbon emissions
(except for construction), but also has the benefit of a much smaller and less hazardous waste stream. Hayward Tyler in the USA
is working with the US government, to design and produce specialist pumps for ITER, as part of the US contribution to the
project.
Nuclear waste remediation: Sellafield 3m3 boxes
The extension of Metalcraft’s 3m3 box contract with Sellafield marks a transition to volume production of these containers. The
boxes will be used to store intermediate level waste (“ILW”) retrieved from silos at legacy locations in Cumbria. In environmental
terms, this storage project represents one of the most positive and important intergenerational equity deliverables of the next few
decades, developing and implementing critical technology to bequeath a pristine environment to posterity.
As part of this transition, Metalcraft will be producing circa 1,000 boxes over phase two of the programme, which is currently
expected to take 6 years. Since 2015, Metalcraft has invested to create the only dedicated facility to supply boxes for ILW in the
UK. As a result, Metalcraft believes it is in a leading position to tender for future decommissioning contracts at Sellafield over
the duration the site decommissioning.
Renewables: Concentrated Solar Power (CSP)
Hayward Tyler in China supplied a glandless pump package to a major Chinese EPC, Shanghai Electric Corporation, for
installation at Bin Rashid Al Maktoum Solar Park Phase IV. This is a 950MW Concentrated Solar Power (CSP) and Photovoltaic
(PV) hybrid power plant. The project makes use of three different technologies to generate clean energy, consisting of 600MW
from a parabolic basin complex, 100MW from a solar tower, and 250MW from PV panels.
It is the world’s largest project using Concentrated Solar Power on a single location. The Dubai solar park is an important project
supporting the Dubai Clean Energy Strategy, which aims to increase Dubai’s use of clean energy to 75% of their total energy
mix by 2050.
Magnetic Resonance Imaging (MRI): Going helium-free
Existing MRI systems rely on liquid helium, to cool the superconducting magnets at the heart of each system. Helium is a scarce,
non-renewable resource, mostly obtained as a by-product of oil extraction. Therefore, in our new compact MRI designs, we are
seeking to take advantage of the smaller system footprint, to enable us to rely on mechanical cooling only, thus eliminating use
of helium entirely in these systems.
Social
Social Responsibility
It is paramount that the Group maintains the highest ethical and professional standards across all of its activities and that social
responsibility should be embedded in operations and decision making. We understand the importance of managing the impact
that the business can have on employees, customers, suppliers and other stakeholders. The impact is regularly reviewed to sustain
improvements, which in turn support the long-term performance of the business. Our focus is to embed the management of these
areas into our business operations, both managing risk and delivering opportunities that can have a positive influence on our
business.
Employees
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters
affecting them directly and on financial and broader economic factors affecting the Group. The Group regularly reviews its
employment policies. The Group is committed to a global policy of equality, providing a working environment that maintains
a culture of respect and reflects the diversity of our employees. We are committed to offering equal opportunities to all people
regardless of their gender, nationality, ethnicity, language, age, status, sexual orientation, religion or disability. We believe
that employees should be able to work safely in a healthy workplace, without fear of any form of discrimination, bullying or
harassment. We have been rolling-out a “dignity and respect” training program across the Group. We believe that the Group
should demonstrate a fair gender mix across all levels of our business, whilst recognising that the demographics of precision
engineering and manufacturing remain predominantly male, which is, to an extent, beyond our control.
18
Strategic Report (Continued)
Social (continued)
Apprenticeships and training
All larger group locations are running apprenticeship schemes for young people, both to act as socially responsible employers
and to optimise the demographics of our workforce over the mid to long term. The most developed of these schemes is at
Metalcraft in Chatteris, UK, where the scheme there is very well established and has won multiple national awards over the past
several years. This scheme is now being taken to another level (post-period end) with Metalcraft being given planning permission
to construct a new training school on the Chatteris site, with construction work now underway.
The centre will be funded through a £3.16million grant from the Cambridgeshire and Peterborough Combined Authority and
will provide training across a range of vocational subjects for between 80 and 130 apprentices per year, for the entire local area.
Health, safety, and wellbeing
The Group takes H&S matters and its related responsibilities very seriously.
As regular acquirers of businesses, we find different levels of capability and knowledge in different situations. Often, a key
investment need in smaller acquisitions is to spread H&S best practice from other Group businesses and bring local processes
up to required standards. Larger acquisitions such as HTG previously) usually have well developed H&S processes and we seek
to learn from these in other business units.
Employee equality, welfare and engagement are critical for developing our key asset. We focus on pro-active actions including
internal training, certifications, and employee engagement through listening, survey and involvement.
Covid-19 has been the biggest health and safety issue for the Group this year. Fortunately, the nature of our products and the
topography of our factories have given us a good base to work from, to make our workplaces Covid-19 safe. We have an overall
set of guidelines to work to, derived from government policies around the world and local teams in each business adapt these to
the specifics of their individual site. These measures include:
• Shielding of vulnerable employees
• Working from home where feasible
• Factory and office re-layouts to facilitate social-distancing
• Enhanced cleaning and site hygiene
• Additional use of PPE equipment where necessary
• Minimisation and careful management of third-party visitors to our sites
Where our employees have to visit other third party sites, they have protocols from their business unit to follow and must also
adhere to the policies and procedures of the site which they are visiting. Each business has a team responsible for ensuring that
the Covid-19 plan is kept up to date and adapted, if required, as the circumstances of the pandemic continue to evolve. Taken
as a whole, these measures have allowed us to operate at a consistently high level of effectiveness throughout the pandemic and
ensured that we have minimised any loss of output, whilst keeping all employees safe.
Our Health and Safety KPIs can be found in the key performance indices section of the strategic report (page 6). Health and
Safety incident reporting has improved across the Group and trends have generally been improving over recent years. Near miss
reporting and knowledge exchange is also positively encouraged, to facilitate learning and improvement. At Board level, Les
Thomas has H&S oversight and he conducts inspections with local management as appropriate.
Ethical policy
The Group complies with the Bribery Act 2010. We do not tolerate bribery, corruption or other unethical behaviour on the part
of any of our businesses or business partners in any part of the world. Employee training has been completed in all areas of the
business to ensure that the Act is complied with.
Outlook
Avingtrans is a niche engineering market leader in the Energy and Medical sectors, with a successful profitable growth record,
underpinned by our ‘PIE’ strategy. Recent acquisitions will provide further opportunities for the Group to build enduring value
for investors in resilient market niches. We will continue to be frugal and seek to crystallise value and return capital when the
timing is right, as part of the PIE strategy implementation. Our PIE strategy has served us well in the current crisis and could
result in further opportunities to grow shareholder value.
19
Strategic Report (Continued)
Outlook (continued)
The Group continues to invest in its three divisions, with a focus on the global energy and medical markets, to position them
for maximum shareholder value via eventual exits in the years to come. The integration of Magnetica is proceeding to plan. The
previous acquisitions of Booth and Energy Steel are recovering well, as demonstrated by the results in the period. The Peter
Brotherhood disposal has left the Group in a strong net cash position, so we are proactively pursuing potential PIE prospects,
with the ability to capitalise on any suitable strategic opportunities. Our value creation targets continue to be accomplished as
planned and are underpinned by a conservative approach to debt.
The energy divisions have a strong emphasis on the thermal power, nuclear and hydrocarbon markets and aftermarkets. Following
the acquisition of a majority stake in Magnetica in the period, the medical division has pivoted to focus on compact, helium-
free MRI systems, which the Board believes could create significant future shareholder value. To drive profitability and market
engagement, each division has a clear strategy to support end-user aftermarket operations, servicing its own equipment and
(where pertinent) third parties, to capitalise on the continued market demand for efficient, reliable and safe facilities.
The on-going disruption caused by the Covid-19 pandemic remains our biggest uncertainty. However, we have taken rapid and
effective cost and risk mitigation actions so far, to limit any potential downside and we will continue to be on our guard.
Despite the impacts of Covid-19, our markets continue to develop and M&A opportunities remain a priority for us. Businesses
like ours can command high valuations at the point of exit, as demonstrated by the disposal of Peter Brotherhood. The Board
remains cautiously confident about the current strategic direction and potential future opportunities across our markets. We
will continue to refine our business by pinpointing specific additional acquisitions as the opportunities arise, to create superior
shareholder value, whilst maintaining a prudent level of financial headroom, to enable us to endure any subsequent headwinds,
whether deriving from Covid-19, or otherwise.
The Strategic Report was approved by the Board on 28 September 2021 and signed on its behalf by:
Roger McDowell
Chairman
28 September 2021
Steve McQuillan
Chief Executive Officer
28 September 2021
Stephen King
Chief Financial Officer
28 September 2021
20
Report of the Directors
The Directors present their report and the audited financial statements for the year ended 31 May 2021.
Matters included in the strategic report
The Directors’ consideration of likely future developments in the business, risks and KPI’s have been included in the Strategic
Report.
Going concern
During the year, the Group has managed its working capital and cash flows prudently and significantly within its available
funding headroom. The cash flows generated from the strong underlying profits were partly absorbed by a £2.2m working capital
outflow, partly due to the envisaged further working capital outflow for the ES and Booth acquisitions, the timing of various
contracts and a lower level of advance payments, resulting in an operating cash inflow of £6.4m for the year (2020 outflow
£0.1m). In addition the cash inflow£26.6m (net of disposal costs) generated on the disposal of PB meant the Group moved into
a substantial net cash position.
At 31 May 2021, the Group had net cash (including IFRS16 debt) of £20.3m (31 May 2020: net debt: £16.3m incl IFRS 16 as
detailed in note 24. Excluding IFRS16, debt at 31 May 2021 was net cash £23.3m (31 May 2020: net debt: £7.4m). Net assets
of £99.0m (2020: £69.9m).
The Group’s system of controls includes a comprehensive budgeting system, with annual budgets approved by the Directors.
Monthly monitoring of actual results against budget is standard and the Board perform a regular review of variances. There is
also a Quarterly review of the Group’s forecasts against actual results and market opportunities /conditions.
Annual budgets consist of a consolidated profit and loss, balance sheet and a cashflow for the following 2 years. This is based
on local managements’ understanding of the markets, customer requirements, supply chains, capability and capacity. This is
challenged by Divisional Management to ensure it reflects a reasonable representation of all evidence available. Executive
Management examine each Division’s budgets in detail, alongside an analysis of risks and opportunities to ensure that they are
adequately sensitised across markets/customers/ contracts /opportunities. Divisional Management present the Budgets to the
Board, which evaluates them against it’s in depth knowledge of market/economic conditions. These Budgets are then refined and
presented for final approval by the Board.
Each quarter, local and divisional management update the 2 year forecast with their latest market knowledge and present the
updated forecasts to the Executive Management and subsequently to the Board.
Key assumptions are applied at a site level, and include a sensitised view of the order pipeline, its conversion and completion,
alongside a risk profile for each division, where further sensitivity is applied, as deemed prudent on consolidation.
As reported in the Strategic Review, the Group still experienced some impacts from Covid-19 during the year. This resulted in
some delayed orders, targeted restructuring, supply chain delays, etc. These conditions were fully recognised during the budget
process, alongside a cautious view of short-term markets, whilst reflecting a restrained view on the trade-out of the current order
book and expected beat rate orders.
As discussed in more detail in the Chairman’s statement and Strategic report, looking into 2022/23 and beyond, the Group has a
number of exciting opportunities across all of its operations that should deliver growth and shareholder value. Despite Covid-19,
we saw the recent acquisitions, Booth and Energy Steel continue to deliver improved performances and we anticipate further
improvement in each case during FY22 and FY23 with underlying positive results and cashflow helping to underpin the near
term Group performance.
As reported at 31 May 2021, the Group had net cash of (including IFRS16 debt) £20.3m, excluding IFRS16 debt at 31 May 2021
net cash was £23.3m. Additionally the Group had £33.9m of undrawn committed borrowing facilities – further details are set
out in note 22.
The Group has met all banking covenants during the year and these are modelled in the budget to ensure forward compliance. The
budgets and results are regularly reviewed with the Group’s principal bankers to ensure adequate banking facilities remain in place
at all times. At the time of writing, the Board expect adequate bank facilities to remain in place throughout the review period.
The Board consider these facilities are sufficient for the Group to meet its approved operational and budget plan. However, the
Board also consider that, should unexpected conditions arise that had not been already adequately modelled through sensitivities
already built into the underlying budget model, that it has the following sources of additional capital:
• Further bank borrowing against freehold land and buildings – including the Luton site which has outline planning permission;
• Potential sale and leaseback of freehold sites;
• Extension of current and re-instatement of previous RCF facilities;
• Extension of borrowing against the debtor book; and
•
Issue of new shares on AIM
21
Report of the Directors (Continued)
Going concern (continued)
The detailed cash flow forecasts for the Group for the period extending to 31 May 2023, indicate that the Group expects to
have adequate financial resources to continue in business and work within its current banking arrangements, to deliver on its
near-term strategic objectives. In the quarter since 31 May 21 the Group has generally performed as expected. Coupled with an
ongoing supportive relationship with the Group’s principal bankers and the fact the Directors have not identified any material
uncertainties that may cast significant doubt on the ability of the company to continue to operate as a going concern, the Directors
continue to adopt the going concern basis in preparing the Annual Report and accounts.
Results and dividends
The Group’s profit for the year before tax from continuing operations amounted to £5,447,000 (loss 2020: £69,000). This
excludes profit after tax from discontinued operations of £22,136,000 (2020: £1,483,000) (note 35). The Board considers that
it is appropriate to declare a final dividend this year in the context of the overall Group result, reflecting no interim dividend
was declared, therefore a final dividend of 4.0p is proposed for the year ended 31 May 2021 (2020: Nil pence), taking the total
dividend for the year to 4.0 pence (2020: total Nil pence).
Substantial shareholdings
As at 28 September 2021, the following had notified the Company that they held or were beneficially interested in 3% or more
of the Company’s issued ordinary share capital:
Harwood Capital
Business Growth Fund
Funds managed by Unicorn Asset Management Limited
Funds managed by JTC Employer Solutions Trustee Limited
R S McDowell’s Pension Fund
P McDowell’s Pension Fund
Funds managed by Threadneedle Investments
Funds managed by LGT Bank
Directors and their interests
Number of
shares
‘000
Percentage
of issued
share capital
owned
4,034
2,363
1,946
1,867
1,406
1,053
1,039
972
12.6%
7.4%
6.1%
5.8%
4.4%
3.3%
3.2%
3.0%
The present Directors of the Company and those that served during the year are set out on page 1. Their interests in the share
capital of the Company are set out below.
R S McDowell
S McQuillan
S M King
L J Thomas
Share options
Ordinary shares of 5p each
31 May
31 May
2020
2021
1,406,409
416,749
361,435
16,000
1,406,409
296,242
259,358
16,000
The Directors’ interests with respect to options to acquire ordinary shares are detailed in the Report of the Directors on
Remuneration.
Interests in contracts
No Director was materially interested in any contract during the year.
22
Report of the Directors (Continued)
Financial instruments
The Group’s operations expose it to a variety of financial risks including the effects of changes in interest rates on debt, foreign
currency exchange rates, funding, working capital, pension scheme, credit risk and liquidity risk.
The Group’s principal financial instruments comprise cash and bank deposits, bank loans and overdrafts and obligations under
finance leases together with trade receivables and trade payables that arise directly from its operations. The Group has entered
into derivative foreign exchange transactions where it has certainty of the outcome. Information about the use of financial
instruments by the Group and the Group’s financial risk management objectives and policy disclosures is given in notes 22 and
24 to the financial statements.
Research and development
During the year £808,000 (2020: £608,000) of development costs (per note 13) were capitalised as intangible assets. This was
predominately at HT Luton for small submersible pump prototype, Metalcraft in relation to waste storage equipment and the
Magnetica sub group for helium free niche MRI application designs.
Disabled persons
The Group gives full and fair consideration to applications for employment from disabled persons, where they have the necessary
abilities and skills for that position, and wherever possible will retrain employees who become disabled, so that they can
continue their employment in another position. The Group engages, promotes, and trains staff on the basis of their capabilities,
qualifications and experience, without discrimination, giving all employees an equal opportunity to progress.
Directors’ indemnities
The Company has taken out directors’ and officers’ liability insurance for the benefit of its Directors during the year which
remains in force at the date of this report.
Employee involvement
It is the policy of the Group to communicate with employees by employee representation on works and staff committees and by
briefing meetings conducted by senior management. Career development is encouraged through suitable training.
S172 – promotion of the success of the Company
The members of the Board consider, both individually and together, that they have acted in the way they consider, in good faith,
would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the
stakeholders and matters set out in s172(1)(a-f) of the Companies Act 2006) in the decisions taken during the year ended 31 May
2021. The Company’s section 172 statement can be found in the Strategic Report on pages 13 to 15.
Statement of Directors’ responsibilities for the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare the Parent and Group financial statements in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and international accounting standards in
conformity with the requirements of the Companies Act 2006. Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs and the profit or loss of the Company
and Group for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and Group
will continue in business.
23
Report of the Directors (Continued)
Statement of Directors’ responsibilities for the financial statements (continued)
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
and Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group
and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors confirm that:
•
•
so far as each of the Directors is aware there is no relevant audit information of which the Company’s and Group’s auditor is
unaware; and
the Directors have taken all steps that they ought to have taken as directors to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that information.
The directors are responsible for preparing the annual report in accordance with applicable law and regulations. The directors
consider the annual report and the financial statements, taken as a whole, provides the information necessary to assess the
company’s performance, business model and strategy and is fair, balanced and understandable.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Auditor
Grant Thornton UK LLP (“Grant Thornton”) are willing to continue in office in accordance with section 489 of the Companies
Act 2006, and a resolution to reappoint them will be proposed at the Annual General Meeting.
The report of the Directors was approved by the Board on 28 September 2021 and signed on its behalf by:
Stephen King
Director
24
Corporate Governance
Chairman’s Introduction
The Group is committed to maintaining high standards of corporate governance. The Board recognises the importance of good
corporate governance under AIM Rule 50 and is accountable to the Company’s shareholders and stakeholders for its adoption
throughout the Group. To facilitate this, we have adopted the Quoted Companies Alliance Corporate Governance Code 2018
(QCA Code).
This statement describes how the Group has complied with the ten high level principles set out in the QCA code.
1. Establish a strategy and business model which promote the long-term value for shareholders
The Board has established a core strategy to buy and build engineering companies in niche markets where we see consolidation
opportunities; a strategy we call Pinpoint-Invest-Exit (“PIE”) which seeks to promote long-term value for shareholders as set out
within the Strategic Report page 4.
2. Seek to understand and meet shareholder needs and expectations
The Board attaches a high level of importance to maintaining good relationships with shareholders, whether they are institutions
or private investors and all other stakeholders, representing them and promoting their interests, as well as being accountable to
them for the performance and activities of the Group. The Board believes it is important to engage with its shareholders and
aims to do this through presentations, conference calls, face-to-face meetings and the Annual General Meeting. Following the
announcement of the Group’s half-year and year-end results, presentations are made to analysts and major shareholders to update
them on progress and invite them to ask questions.
The Board is updated on the latest shareholder information by the receipt of shareholder register movements, analyst reports and
feedback from the Group’s brokers, following investor road shows after half-year and year-end results.
The Board encourages all Directors to attend the Annual General Meeting as an opportunity to communicate directly with
investors and actively encourages participative dialogue.
The Company provides contact details on its investor relations page on the Company’s corporate website: www.avingtrans.plc.uk.
3. Take into account wider stakeholder and social responsibilities and their implications for long-
term success
The Board recognise that our customers, suppliers and employees are crucial to the Group’s success. The Group’s responsibilities,
policies and controls on Health, Safety and Environment (HSE) and Social Responsibility including SECR are set in the Strategic
Report pages 15 to 19.
We have established long-term relationships with key customers and suppliers. We encourage feedback from our employees to
improve the culture and working environment of the Company and hold regular meetings to keep them informed on matters
affecting them directly and on financial and broader economic factors affecting the Group. There are specific information channels
in respect of health & safety matters. The Group has a proactive approach to health, safety and the environment and is committed
to the highest practicable standards of safety and health management and the minimisation of adverse environmental impacts.
During the period we embedded further SECR reporting on carbon emissions for our UK sites. However, given the disruption
to the operations in the year resulting from the Covid-19 pandemic, and this being the first year of data capture, we have not
set Group goals at this point. However, many of our sites who hold the ISO 14001 are already working towards achieving their
site-specific goals.
4. Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Board’s approach to risk is intended to protect the interests of our shareholders and other stakeholders whilst allowing the
business to develop. Our risk appetite depends on the nature of an individual risk and it is considered in Board discussions and
also as part of our risk review process in the Audit Committee. From time to time, we obtain advice from third party experts, in
a cost-effective manner, to complement in-house knowledge.
The long-term success of the Group relies, in part, on managing the risks to our business. Whilst the Group has risk management
policies and practices in place, which address and monitor risk, we seek to improve those practices each year. The Chief Financial
Officer is responsible for risk management on behalf of the Board and the Audit Committee reviews the risk register on a regular
basis. Ultimately, our aim is to ensure that risk management is embedded within the core processes of our business units.
The Group uses a risk register to help coordinate its risk management process. The risk register identifies the key business risks
and documents the policies and practices in place to mitigate those risks.
25
Corporate Governance (Continued)
We classify the principal risks to the business into three groups, namely, strategic risk, operational risk and financial risk.
The principal risks identified by the Directors under these groups are set out in the Strategic Report pages 9 to 13. The risks
considered during the Group-wide risk management process cover a wider range of issues than the key risks.
The Board, through the Audit Committee, reviews the operation and effectiveness of the systems of internal control throughout
the accounting year and the period to the date of approval of the financial statements, although it should be understood that
such systems are designed to provide reasonable, but not absolute assurance against material misstatement or loss. The Group’s
system of controls includes:
• A comprehensive budgeting system with annual budgets approved by the Directors. Monthly monitoring of actual results
against budget and regular review of variances.
• Close involvement of Directors, who approve all significant transactions.
•
•
• Bank facilities and other treasury functions, which are monitored and policy changes approved by the Board.
Internal management rules which include financial and operating control procedures for all management of the Group.
Identification and appraisal by the Board of the major risks affecting the business and the financial controls.
The Board has considered the need for an internal audit function and concluded that this would not be appropriate at present due
to the size of the Group.
5. Maintain the Board as a well-functioning, balanced team led by the chair
The Board of Avingtrans plc comprises of a Non-executive Chairman, two Executive Directors and two Non-executive Directors.
The Board is chaired by R S McDowell and assisted by the Senior Independent Non-executive Director L J Thomas, who have
primary responsibility for running the Board.
S McQuillan, has executive responsibilities for the remaining operations, results and strategic development of the Group. S M
King is Chief Financial Officer and Company Secretary. The Board structure ensures that no individual or group dominates the
decision-making process.
The Non-executive Directors are considered to be independent of management and from any business relationship which
could materially interfere with their independent judgement. The Senior Independent Non-executive Director is available to
shareholders if they have concerns.
The Board meets regularly with no less than ten such meetings held in each calendar year rotating locations around different
business units. There is a formal schedule of matters specifically reserved to the Board for its decision to enable it to manage overall
control of the Group’s affairs. Management has an obligation to provide the Board with appropriate and timely information to
enable it to discharge its duties. The Chairman ensures that all Directors are properly briefed on issues arising at Board meetings.
The Nominations Committee is responsible for monitoring and reviewing the membership and composition of the Board,
including the decision to recommend the appointment, or to re-appoint a director.
The Company’s Articles of Association ensure Directors retire at the third Annual General Meeting after the Annual General
Meeting at which they were elected and may, if eligible, offer themselves for re-election.
R S McDowell chairs the Nominations Committee, L J Thomas chairs the Audit Committee and J S Clarke chairs the Remuneration
Committee. The Non-executive Directors and the Chairman are members of all the above committees.
6. Ensure that between them the directors have the necessary up-to-date experience and capabilities
The Board reviews its configuration to ensure it has the skills and oversight capability in key markets on a regular basis,
strengthening our ability to leverage shareholder value via the PIE strategy.
All new Directors receive a full, formal and tailored induction on joining the Board, including meetings with senior management
and advisers and visits to the Group’s operational locations. Training requirements are reviewed periodically and appropriate
refreshers scheduled.
The Board calendar is planned to ensure that Directors are briefed on a wide range of topics throughout the year and meetings
are rotated around business units, to ensure the Non-Executive Directors have the opportunity to visit sites and discuss aspects
of the business with employees.
All Directors have access to the services of the Company Secretary and may take independent professional advice at the Group’s
expense in the furtherance of their duties.
26
Corporate Governance (Continued)
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The Chairman reviews the Board’s annual performance and measures its effectiveness and that of its Committees. Each
Board/Committee member completes an assessment, which provides numeric scoring against specific categories. Each Board/
Committee member also provides recommendations for improvement of the effectiveness of the Board/Committee.
The criteria for effectiveness include assessing:
• Board/Committee composition (including succession planning);
• Board/external reporting and information flows;
• Board Process, Internal Control & Risk Management
• Board Accountability
• Executive management effectiveness;
• Standards of Conduct.
Alongside this review each Director receives an appraisal. The Chairman conducts appraisals in respect of the Group Chief
Executive and Non-Executive Directors; the Non-Executive Directors (following discussions with the other Directors) conducts
the Chairman’s appraisal; and the Group Chief Executive conducts appraisals in respect of the other Executive Directors.
8. Promote a corporate culture that is based on ethical values
Culture
The Company has a strong ethical culture based upon its Code of Ethics and the Company values Integrity, Quality and Agility.
The Company’s reputation is built on our values, the values of our employees, and our collective commitment to acting at all
times with integrity.
Part of the work of the Audit & Risk Committee involves reviewing the Group Whistle-Blowing Policy, by which employees of
the Group may, in confidence, raise concerns about possible financial or other improprieties.
The Board’s corporate governance structures are reviewed as part of the Board and Committee effectiveness process described
above.
Compliance with laws
The Group has systems in place designed to ensure compliance with all applicable laws and regulations and conformity with all
relevant codes of business practice.
Compliance with the Bribery Act 2010 involves an Anti-Corruption Policy and a Group Whistle-blowing Policy. Training is
given to all appropriate employees through the use of online tools, to ensure that there is full understanding of the Bribery Act
2010 and awareness of the consequences of not adhering to Group policies.
The Group has taken the appropriate steps to comply with the provisions of the Market Abuse Regulation and the Modern
Slavery Act. The Group has also taken appropriate steps to comply with the General Data Protection Regulation (GDPR)
and has appointed a Data Protection Officer, who is responsible for managing information governance and implementing the
requirements of GDPR.
Safety, health and environment
The Group has a proactive approach to Safety, Health and the Environment and is committed to the highest practicable standards
of safety and health management and the minimisation of adverse environmental impacts.
The Board ensures that Health and Safety issues for employees, customers and the public are of foremost concern in all Group
activities. The Group Chief Executive, supported by external advice, is charged with overall responsibility. The Group encourages
both internal and external training through a formal network of full-time officers and Health and Safety nominated “champions”
at all levels. Statistical analysis is used to highlight any areas where additional training or improved working practices would be
beneficial, and positive action is promptly implemented. All divisions have formulated safety management systems.
Insider trading
The Board has appropriate policies and procedures in place to guard against insider trading by employees including Directors.
Appropriate clearances are required in order that trades can be made and all applicable employees are made aware of relevant
close periods prior to financial results being announced.
27
Corporate Governance (Continued)
9. Maintain governance structures and processes that are fit for purpose and support good decision-
making by the Board
The Board
Please see details above at “5. Maintain the Board as a well-functioning, balanced team led by the chair” and has a schedule of
matters which are specifically reserved for its decision.
Board Committees
The Board has three Committees that assist in the discharge of its responsibilities:
• Remuneration;
• Audit & Risk; and
• Nominations.
Remuneration Committee
The Remuneration Committee is responsible for making recommendations to the Board on the Group’s framework of executive
remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the
Executive Directors, including performance-related bonus schemes, pension rights and compensation payments. The Board
itself determines the remuneration of the Non-Executive Directors. The Remuneration Committee comprises the Non-Executive
Directors. Further details on the composition and work of the Remuneration Committee are set out in the Remuneration Report
on pages 30 to 31.
Audit & Risk Committee
The Audit & Risk Committee comprises the Non-Executive Directors. The Committee meetings are also attended, by invitation,
by the Chief Executive and Group Finance Director. The Committee meets no less than two times annually.
The Committee is responsible for reviewing a wide range of financial reporting and related matters including the annual accounts
before their submission to the Board. The Committee is required to focus in particular on critical accounting policies and practices
adopted by the Group, and any significant areas of judgment that materially impact reported results. It is also responsible for
monitoring the internal controls that are operated by management to ensure the integrity of the information reported to the
shareholders.
The Committee provides a forum for reporting by the Group’s external auditors, and advises the Group Board on the appointment,
independence and objectivity of the external auditors and on their remuneration both for statutory audit and non-audit work. It
also discusses the nature, scope and timing of the statutory audit with the external auditors.
Nominations Committee
The Nominations Committee is responsible for reviewing the structure, size and composition required of the Board when
compared to its current position, and it makes recommendations to the Board with regard to any changes. It considers and
reviews succession planning for Board Directors, taking into account the challenges and opportunities facing the Company. It
identifies and nominates for Board approval suitable candidates to fill Board vacancies as and when they arise, and it keeps under
review both the Executive and Non-Executive leadership needs of the Company to enable the Company to compete effectively
in the marketplace and to ensure it has the skills and oversight capability in our key.
The Nominations Committee also has responsibility for overseeing the re-election by shareholders of any director under the
‘retirement by rotation’ provisions in the Company’s articles of association.
Executive Management Committee
The Board is supported by Executives, who meet at least quarterly to review performance and governance for the Group and
regularly perform site visits. A well-defined delegation of authority matrix enables the divisional management teams to operate
with a degree of autonomy at a business unit level.
Evolution of governance framework
The Board continuously monitors its composition and governance framework, taking into account effectiveness and the
Company’s plans for future growth.
28
Corporate Governance (Continued)
10. Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and relevant stakeholders
The corporate governance principles are set out in this statement governance above and the performance of the Company is set
out in the Strategic Report page 4.
The Board maintains an active dialogue with both its institutional and private investors and stakeholders through the Annual
Report, full-year and half-year announcements, the Annual General Meeting, General Meetings and one-to-one meetings with
larger existing, or potential new shareholders. In addition, we are now seeking to keep smaller shareholders better informed by
reaching out through appropriate communications channels (eg Vox Markets).
The Board encourages all Directors to attend the Annual General Meeting as an opportunity to communicate directly with
investors and actively encourages participative dialogue.
The Company provides a full range of corporate information (including all Company announcements, Annual and half year
Statements and presentations, contact details) to shareholders, investors and the public on the Company’s corporate website:
www.avingtrans.plc.uk.
The results of the proxy votes for the Company’s previous Annual General Meeting on 18 November 2020 were published
through RNS.
Roger McDowell
Chairman
28 September 2021
29
Report of the Directors on Remuneration
Composition
The Remuneration Committee during the period comprised J S Clarke (Chairman), R S McDowell and L J Thomas.
Principal function
The remuneration packages, including contract periods of Executive Directors and senior management, are determined by
the Remuneration Committee. It ensures that the remuneration packages are appropriate for their responsibilities, taking into
consideration the overall financial and business position of the Group. The remuneration of R S McDowell is determined by the
Non-executive Directors.
Avingtrans Remuneration Principles
Our remuneration principles are driven by the idea that executive remuneration should be simple and straightforward. Additionally,
it should support the delivery of the Pinpoint-Invest-Exit (PIE) strategy and pay only for results when we exit businesses at an
enhanced shareholder value. Our remuneration structure has the following attributes:
• The base salary, benefits and annual bonus of the executive Directors are positioned around the average for our peer group
on AIM, relative to our scale.
• Long-term incentives are directly aligned to shareholders’ interests, by linking remuneration specifically to the creation of
shareholder value.
The Group’s PIE strategy is well known to our shareholders. The Committee believes that the strategy should be linked to the
Directors’ Remuneration. This means that the base salaries for the executive Directors are set as above, but with a weighting
towards long-term incentives. These incentives reward Directors only for significant outperformance and where shareholders
also share in the resulting gains. Specifically:
• The executive Directors and the Chairman are aligned with shareholders, as material investors in Avingtrans.
• Management are incentivised to maximise returns for shareholders in two ways:
• Via awards of share options, which are again pegged at around the average award level for our peer group on AIM and
which can only be exercised on the achievement of substantial share price growth.
• By means of Exit bonus elements, which only trigger on the disposal of businesses and which are calculated as a percentage
of the shareholder value enhancement for that asset – ie taking account of the initial investment on acquisition, any additional
investment during the period that the business is owned by Avingtrans and the disposal proceeds, net of costs.
Base salary and benefits
The Committee sets the salary of each Executive Director by reference to the responsibility of the position held, performance of
the individual and external market data. Salaries are reviewed annually.
Annual performance related bonus
The Company operates a bonus scheme for its Directors which enables it to attract and retain high calibre senior management
personnel who make a major contribution to the financial performance of the Group. Bonuses paid under the scheme are accrued
under the annual bonus plan approved by the Remuneration Committee. The plan is based on various financial metrics around
cash and financial performance.
Divisional Long-term incentives
The Committee has instigated long-term incentives for divisional senior management which align this cohort with shareholders,
since they are based purely on performance and on the increase in value of the Group – ie:
• Via awards of appropriate share options, such as using a standard “CSOP” HMRC-approved scheme.
• By means of Exit bonuses as noted above.
Exit bonus arrangements are intended to incentivise Directors and senior managers to create value for the Group and our
shareholders. These bonus elements only pay out if a material exit has occurred and if substantial shareholder added value is the
result. The Board has ultimate control of Exit timing, to ensure that optimum value is achieved.
Share options
The Committee is responsible for approving grants of share options to the Executive Directors. Options may be exercised
between three and ten years from the date the option is granted but only if certain performance criteria are satisfied, as set out
on page 31.
30
Report of the Directors on Remuneration (Continued)
Pensions
The Company is responsible for the contributions to the defined contribution schemes selected by the Executive Directors.
Details of contributions provided in the year are set out in note 7 to the financial statements.
Service agreements
R S McDowell, S McQuillan and S M King have service contracts which are terminable on 12 months’ notice by either party.
The Committee consider that these contracts are in line with the market.
Non-executive Directors
Non-executive Directors’ remuneration is reviewed by all members of the Board other than the Non-executive Director under
review and takes the form solely of fees. L Thomas and J Clarke have a letter of appointment terminable on three months’ notice
by either party.
Compensation for loss of office
There are no predetermined special provisions for Executive or Non-executive Directors with regard to compensation in the
event of loss of office. The Remuneration Committee considers the circumstances of individual cases of early termination and
determines compensation payments accordingly with the aim not to reward poor performance.
Directors’ emoluments
Details of the remuneration of all Directors are set out in note 7 to the financial statements.
Share options
Details of the share options of all Directors are as follows:
Executive:
S McQuillan
S M King
22/11/2013
21/12/2016
15/12/2017
15/11/2018
17/12/2019
24/11/2020
25/09/2010
22/11/2013
21/12/2016
15/12/2017
15/11/2018
17/12/2019
24/11/2020
At 1 June
2020
£
Date of
grant
95,000
450,000
140,000
115,000
175,000
–
At 31 May
2021
£
Exercised
Weighted
average
exercise
price
£
95,000
15,250
140,000
–
–
–
–
434,750
–
115,000
175,000
180,000
1.760
1.930
1.815
2.200
2.670
2.880
Granted
–
–
–
–
–
180,000
975,000
180,000
250,250
904,750
2.296
39,733
84,000
330,000
110,000
100,000
155,000
–
–
–
–
–
–
–
160,000
39,733
84,000
15,250
110,000
–
–
–
–
–
314,750
–
100,000
155,000
160,000
818,733
160,000
248,983
729,750
0.395
1.760
1.930
1.815
2.200
2.670
2.880
2.332
The share options are exercisable between three and ten years from the date of grant if the growth in adjusted basic earnings per
share of Avingtrans plc during the three years between grant date and vesting date is at least equal to the increase in the Retail
Price Index during the same period.
J S Clarke
Chairman of the Remuneration Committee
28 September 2021
31
Independent Auditor’s Report to the
Members of Avingtrans plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Avingtrans Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 May 2021 which comprise the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated and company balance sheets, the consolidated and company statements of changes in equity, the
consolidated and company statements of cash flows and notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and
international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the
parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31
May 2021 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006..
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our
report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of
accounting, and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of our
report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the
financial statements’ section of this report.
32
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: £983,000, which represents 1% of the group’s revenue.
Parent company: £397,000, which represents 0.5% of the parent company’s total assets.
Key audit matters were identified as:
• Occurrence of long-term contract revenue – Contracts not completed at year-end (New);
• Valuation of goodwill (Same as previous year);
• Accuracy of Goodwill and intangibles arising on business combinations (New)
• Accuracy of defined benefit pension liabilities (Same as previous year); and
• Going Concern (Same as previous year)
Our auditor’s report for the year ended 31 May 2020 included two key audit matters that have
not been reported as key audit matters in our current year’s report. These relate to the accuracy,
completeness, valuation and presentation of the application of IFRS 16 which is no longer
deemed to be a key audit matter due to the prior year representing the year of adoption of IFRS
16. The second key audit matter relates to the occurrence of long-term contract revenue and
by association accuracy of accrued income, completeness of deferred income and accuracy of
work in progress, this risk has been pinpointed in the current year to focus specifically on the
contracts not completed at year-end.
We performed full scope audit procedures on the financial statements of all group entities in
the United Kingdom and Hayward Tyler Inc a company registered in the United States. We
performed substantive procedures on the key audit matters identified for the Group in Energy
Steel and Supply Co, a company incorporated in the United States. We performed analytical
procedures over non-significant components in India, China and the United States.
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those that had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In the graph below, we have presented the key audit matters, significant
risks and other risks relevant to the audit.
Description
Audit
response
KAM
Disclosures
Our Results
33
Independent Auditor’s Report to the
Members of Avingtrans plc
t
c
a
p
m
i
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
l
a
i
t
n
e
t
o
P
High
Occurence
of ship & bill
revenue
Occurence
of long-term
contract revenue
– delivered
contracts
Valuation
of assets
Accuracy of
capitalised
development
expenditure
Completeness
of warranty
provision
Low
Low
Accuracy of profit
on disposal of
discontinued
operation (group)
Valuation of
goodwill
Accuracy
of defined
benefit
pension
liabilities
Presentation
of exceptional
expenditure
Valuation of
investments
Occurance
of long-term
contract
revenue
Accuracy of
goodwill and
intangibles arising
on business
combinations
Presentation of
discontinued
operations
Going Concern
Management
over-ride of
controls
Government
assistant schemes
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
Key Audit Matter – Group
How our scope addressed the matter – Group
Risk 1 – occurrence of long term contract revenue –
Contracts not complete at year-end
In responding to the key audit matter, we performed the
following audit procedures:
We identified the occurrence of long-term contract revenue
– contracts not complete at year-end as one of the most
significant assessed risks of material misstatement due to
fraud and error.
Revenue is recognised throughout the group as the fair value
of consideration receivable in respect of the performance of
contracts.
Determining the amount of revenue to be recognised on
the performance of contracts open at the year-end requires
management to make significant judgements and estimates
as to the stage of completion, the cost to complete and impact
of any changes in scope of work. These estimates increase
the susceptibility of the occurrence of long-term contract
revenue to management bias.
• performing walkthroughs
effectiveness of controls;
to assess
the design
•
•
•
•
•
assessing whether the revenue recognition accounting
policy is in accordance with the requirements of IFRS 15
and has been applied appropriately and consistently;
testing a sample of contracts open at the year-end on a
risk-based approach where revenue was recognised in
the year and agreement of the revenue recorded through
consideration of key information including; the total
contract value, total expected costs and costs incurred in
the year;
comparing the prior estimates for total costs and the
associated revenue recognised for accuracy against the
actual achieved results to test management’s accuracy in
forecasting costs on contracts; including an assessment
of any changes resulting from the impact of COVID-19;
testing of period 13 adjustments and management
journals impacting revenue to assess the appropriateness
of such journals; and
challenging management regarding
the status and
judgements made regarding contracts selected for testing
and gained further corroboration where needed.
34
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Relevant disclosures in the Annual Report and
Accounts 2021
• Financial statements: Note 2 – Segmental analysis
Our results
Our audit work did not identify any material misstatements
in the occurrence of long-term contract revenue relating to
contracts not completed at year-end.
Key Audit Matter – Group
How our scope addressed the matter – Group
Risk 2 – Valuation of goodwill – Medical and Industrial
Imaging division
In responding to the key audit matter, we performed the
following audit procedures:
We identified valuation of goodwill - Medical and Industrial
imaging division as one of the most significant assessed risks
of material misstatement due to error.
The group has recorded goodwill before impairment of
£22,227k of which £1,825k is associated to the medical and
industrial imaging division as a result of previous acquisitions
and acquisitions in the year.
IAS 36 requires goodwill to be tested annually for impairment
at a cash generating unit (CGU) level.
Our risk is focused on the Medical and Industrial Imagine
division due to the nature of the division being research
and development focused and a lack of profits in current
and previous years. The valuation of the CGU is subject to
estimation uncertainty and is susceptible to management
bias through the key assumptions used in the discounted cash
flow calculation. Due to the nature of this CGU the headroom
is lower than other CGU’s and thus there is greater sensitivity
around the key assumptions.
•
considering the appropriateness of the cash generating
unit definition applied by management, based on
discussions with management and inspection of internal
reporting documents;
• obtaining and challenging management’s forecasts
supporting the carrying value of goodwill, including
consideration of management’s assumptions on the
impact of Brexit and Covid-19 and historical forecasting
accuracy;
•
•
the discount rate applied,
assessing
including an
assessment by our valuation specialist and assessing
management’s sensitivity analysis on key assumptions;
assessing management’s forecasts with regards to its
compliance with the requirements of IAS 36 ‘Impairment
of Assets’;
• performing walkthroughs
effectiveness of controls; and
to assess
the design
•
assessing the accuracy and sufficiency of financial
statement disclosures in respect of goodwill.
Relevant disclosures in the Annual Report and
Accounts 2021
• Financial statements: Note 12, Goodwill
Our results
Our audit work did not identify any material misstatements
in the valuation of goodwill relating to the medical and
industrial imaging division.
Key Audit Matter – Group
How our scope addressed the matter – Group
Risk 3 – Accuracy of goodwill and intangibles arising on
business combination
In responding to the key audit matter, we performed the
following audit procedures:
We identified the accuracy of goodwill and intangibles arising
on business combinations as one of the most significant
assessed risks of material misstatement due to error.
During 2021 the group acquired a majority share of Magnetica
Limited. As a result of the business combination goodwill of
£324k and intangible assets of £3,119k have been recognised
in the consolidated balance sheet.
•
the
inspecting
legal agreements and assessing
management’s accounting for the business combination
to ensure it was completed in accordance with the
significant terms of the agreements;
• obtaining management’s valuation workings and in
conjunction with our internal experts assessing for
compliance with IAS 38 ‘Intangible Assets’ and IFRS 3
‘Business Combinations’;
35
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Management have been required to make significant
estimations relating to the business combination, such
as the calculations relating to the fair values of the
consideration and acquired intangibles which have been
based on discounted cash flow and replacement cost
methods of valuation respectively. These calculations require
management estimates which are susceptible to management
bias, thus increasing the risk associated with the recording of
transaction in the financial statements.
• obtaining and challenging management’s assumptions
in determining the fair value of the assets acquired and
the inputs used in valuing the intangible assets recorded,
including the use of internal experts to assist in assessing
the fair value of consideration and assets acquired;
•
•
selecting a sample of intangibles recognised on the
business combination and agreeing those selected to
corroborating evidence and checking recognition is in
compliance with IAS 38 ‘Intangible Assets’; and
assessing the accuracy and sufficiency of financial
statement disclosures
in respect of goodwill and
intangible assets arising on business combinations.
Relevant disclosures in the Annual Report and
Accounts 2021
• Financial statements: Note 35, Acquisitions and disposals
• Strategic Report: Strategic Risk C PIE Strategy mergers,
acquisitions and disposals
Our results
Our audit work did not identify any material misstatements in
the accuracy of goodwill and intangibles arising on business
combination.
Key Audit Matter – Group
How our scope addressed the matter – Group
Risk 4 – Accuracy of defined benefit pension liabilities
We identified the accuracy of defined benefit pension
liabilities as one of the most significant assessed risks of
material misstatement due to error.
Hayward Tyler Limited, a subsidiary of the group, operates
a defined benefit pension scheme that provides benefits to a
number of current and former employees. The scheme was
inherited by the group on acquisition of Hayward Tyler
Limited and subsequently closed to new participants in 2003.
The valuation of the pension liabilities in accordance with
IAS 19 ‘Employee Benefits’ involves significant judgement
and is subject to complex actuarial assumptions.
There is also an increased risk of significant movements in
the pension scheme position at the year end as a result of the
economic impact of Covid-19.
Relevant disclosures in the Annual Report and
Accounts 2021
• Financial statements: Note 28, Pensions, and other
employee obligations
• Strategic Report: Strategic Risk K Pension Scheme
In responding to the key audit matter, we performed the
following audit procedures:
• performing a walkthrough of management’s process and
methodology used for accounting for the defined benefit
pension scheme and assessing the design effectiveness of
key controls;
• using an auditor’s expert to challenge the assumptions
used by the actuary in calculating the pension scheme
liability;
•
•
testing the accuracy of data used by the actuary for the
purpose of calculating the scheme liabilities by selecting
a sample of employees and agreeing key member data to
source records; and
assessing the accuracy and sufficiency of financial
statement disclosures in respect of pension scheme
liabilities.
Our results
Our audit work did not identify any material misstatements in
the accuracy of defined benefit pension liabilities.
36
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Key Audit Matter – Group
Risk 5 – Going Concern
We identified Going Concern as one of the most significant
assessed risks of material misstatement.
Covid-19 is amongst the most significant economic events
currently faced in the UK and continues to lead to uncertainty
in the UK economy. This event could adversely impact the
future trading performance of the group and the parent
company and as such increases the extent of judgement
and estimation uncertainty associated with management’s
decision to adopt the going concern basis of accounting in
the preparation of the financial statements.
Relevant disclosures in the Annual Report and
Accounts 2021
• Report of the Directors: Page 21, Going Concern
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the
following audit procedures:
•
In responding to the key audit matter, we performed the
following audit procedures:
• obtaining and challenging management’s assessment,
as supported by their forecasts and other information to
understand management’s basis for determining that the
entity remains a going concern, which cover the period
to 31 May 2023. This included the consideration of
management’s scenario planning and the inherent risks
associated with the group’s and the parent company’s
assumptions in relation to Brexit and Covid-19;
•
•
•
•
•
•
assessing the accuracy of management’s forecasts by
comparing the accuracy of actual financial performance
to the forecast information;
considering the severity and plausibility, in light of our
knowledge of the business, of management’s sensitivity
analysis for downside scenarios;
corroborating the opening net cash position within
management’s forecast to supporting evidence;
the appropriateness and
assessing
robustness of
management’s forecasts by performing audit sensitivities
based on a range of scenarios;
evaluating the assumptions applied in the cash flow
forecasts, using our internal specialists, to assist in the
assessment of the cash flow forecasts; and
assessing the accuracy and sufficiency of the financial
statement disclosures
the basis of
preparation of the financial statements and assessing
the appropriateness of the use of the going concern in
preparing the financial statements.
concerning
Our results
Our audit work did not identify any material uncertainties
relating to events or conditions that, individually or
collectively, may cast significant doubt on the groups and
parent’s ability to continue as a going concern for at least
twelve months from when the financial statements are
authorised for issue.
37
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in
the auditor’s report.
Materiality was determined as follows:
Materiality Measure
Group
Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality threshold
£983,000 which represents 1% of the
group’s revenue.
£397,000 which represents 0.5% of the
parent company’s total assets.
Significant judgements
made by auditor
in determining the
materiality
In determining materiality, we made the
following significant judgements:
In determining materiality, we made the
following significant judgements:
• The benchmark is considered the
most appropriate because the parent
company is a holding company and has
no revenue.
Materiality for the current year is higher
than the level that we determined for the
year ended 31 May 2020 to reflect the
parent company’s increased total assets in
the current year.
• The benchmark is considered the most
appropriate due to revenue being a key
driver of the business and is monitored
by management and the directors. As
part of our assessment, we considered
the use of earnings before tax however,
due to significant fluctuations in the
group’s earnings before tax this was not
deemed to be appropriate.
• We also referred to key performance
indicators raised in the annual report on
page 8 reflecting the use of revenue as a
key driver for the group.
• The percentage of 1% was applied
based on the continuing uncertainties in
the macro-economic environment and
the group being listed on AIM.
Materiality for the current year is lower than
the level that we determined for the year
ended 31 May 2020 to reflect a reduction in
group revenue.
Performance materiality
used to drive the extent
of our testing
We set performance materiality at an amount less than materiality for the financial statements
as a whole to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the financial statements
as a whole.
Performance materiality
threshold
£688,100 which
statement materiality.
is 70% of financial
£277,900 which
statement materiality.
is 70% of financial
Significant judgements
made by auditor
in determining the
performance materiality
In determining materiality, we made the following significant judgement:
• Our experience with auditing the financial statements of the group and parent company
in previous years – based on the control environment and the number of identified
misstatements in the prior year audit.
38
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Materiality Measure
Group
Parent company
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for directors’ remuneration and
related party transactions.
We determined a lower level of specific
materiality for directors’ remuneration and
related party transactions.
Communication of
misstatements to the
audit committee
Threshold for
communication
We determine a threshold for reporting unadjusted differences to the audit committee.
£49,150 and misstatements below that
in our view, warrant
threshold
reporting on qualitative grounds.
that,
£19,850 and misstatements below that
in our view, warrant
threshold
reporting on qualitative grounds.
that,
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
Group
Revenue
£98,252,000
PM
£688,100,
70%
FSM
£983,000
1%
TFPUM
£294,900
30%
Total Assets
£79,312,000
PM
£277,900,
70%
FSM
£397,000
0.5%
TFPUM
£119,100
30%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular
matters related to:
Understanding the group, its components, and their environments, including group-wide controls
• The engagement team obtained an understanding of the group and its environment, including group-wide controls, and
assessed the risk of material misstatements at a group level;
• The group comprises of 16 trading components based across England & Wales, United States of America, China, India and
Australia, 6 holding components, 2 property components, 1 pension administrative component and 4 dormant components.
The group’s financial system is independent at each component however input is provided into the group wide controls by
group management;
39
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
Identifying significant components
• The components of the group were identified by the group engagement team based on a measure of materiality to assess the
significance of each component and determine the planned audit response. Significance was determined as a percentage of the
group’s total assets, revenues and profit before taxation;
Work to be performed on the financial information of the parent and other components
• A full scope audit approach (audit of the financial information of the components using component materiality) for all
significant components was determined based on their relative materiality to the group and our assessment of the audit risk.
We evaluated the processes and controls over the financial reporting system identified as part of our risk assessment, reviewed
the financial statement production process and addressed critical accounting matters such as those related to the key audit
matters as identified above. We then undertook substantive testing of significant transactions and material account balances;
• In order to respond to the audit risks identified in our risk assessment, we performed a full scope audit of the financial
statements of the parent company, Avingtrans plc (in the United Kingdom), and all other component entities in the United
Kingdom as well as Hayward Tyler Inc, a company registered in the United States. We also performed substantive procedures
on the key audit matters identified at the group level in Energy Steele and Supply Co, a company incorporated in the United
States;
• With the exception of going concern, the group’s key audit matters do not arise in each component. The key audit matter
occurrence of long-term contract revenue - contracts not complete at year-end is relevant to Hayward Tyler Limited, Hayward
Tyler Inc, Hayward Tyler Fluid Handling Limited, Stainless Metalcraft Limited and Maloney Metalcraft Limited. The
accuracy of defined benefit pension liabilities is applicable to Hayward Tyler Limited only. The key audit matter relating to
the accuracy of goodwill and intangibles arising on business combinations relates to parent company and the valuation of
goodwill – medical and industrial imaging division relates to the group only;
• The non-significant group components in the United States, India and China were subject to analytical procedures. Where
necessary specified procedures were performed over material financial statement line items in these group entities;
Performance of our audit
• Full scope audits were performed by the group audit team for thirteen components (twelve based in the UK and one based in
the US), this represents 81% of total revenues, 78% of total assets and 85% of profit before tax;
• Specific scope audits and specified audit procedures were performed for three components (one based in the US, one based in
China, and one based in Australia), this represents 15% of total revenues, 14% of total assets and 13% of profit before tax;
• We completed site visits at six UK sites. Stock counts for all UK based trading components were attended in person with stock
counts at the two US based trading components attended virtually;
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
40
Independent Auditor’s Report to the
Members of Avingtrans plc (continued)
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
•
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the
inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be
detected, even though the audit is properly planned and performed in accordance with the ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory frameworks applicable to the parent company and the group and
the industry in which they operate. We determined that the following laws and regulations were most significant: IFRSs, AIM
Rules, Companies Act 2006, Tax and the QCA Code;
• We communicated relevant laws and regulations and potential fraud risks to all engagement team members and remained alert
to any indications of fraud or non-compliance with laws and regulations throughout the audit;
• We enquired of management and those charged with governance, concerning the group’s policies and procedures relating to:
°
°
the identification, evaluation and compliance with laws and regulations; and
the detection and response to the risks of fraud;
• We enquired of management and those charged with governance, whether they were aware of any instances of non-compliance
with laws and regulations or whether they had any knowledge of actual, suspected or alleged fraud;
• In addition, we concluded that there are certain specific laws and regulations that may have an effect on the determination
of amounts and disclosures in the financial statements and those laws and regulations relating to health and safety, employee
matters, environmental and bribery and corruptions matters;
• We corroborated the results of our enquiries to relevant supporting documentation;
• We obtained an understanding of how the parent company and the group is complying with those legal and regulatory
41
Independent Auditor’s Report to the
Members of Avingtrans plc (Continued)
frameworks by making inquiries of management, those responsible for legal and compliance procedures and the company
secretary. We corroborated our inquiries through our review of board minutes and papers provided to the Audit Committee;
• We assessed the susceptibility of the parent company’s and group’s financial statements to material misstatement, including
how fraud might occur. Audit procedures performed included:
°
° understanding how those charged with governance considered and addressed the potential for override of controls or other
identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
inappropriate influence over the financial reporting process;
° challenging assumptions and judgments made by management in its significant accounting estimates; and
°
identifying and testing journal entries posted in the year which were deemed to be unusual;
• We note our key audit matter in relation to the occurrence of long-term contract revenue relating to contracts not complete
at year-end relates to irregularities, including fraud. Refer to key audit matters for work completed and our results from the
procedures performed;
• No matters of non-compliance with laws and regulations and fraud were identified by the engagement team or communicated
to the engagement team; and
• In assessing the potential risks of material misstatement, we obtained an understanding of:
°
°
°
the parent company’s and group’s operations, including the nature of its revenue sources and of its objectives and strategies
to understand the classes of transactions, account balances, expected financial statement disclosures and business risks that
may result in risks of material misstatement;
the applicable statutory provisions; and
the parent company’s and group’s control environment, including the policies and procedures implemented to comply with
the requirements of its regulator, the adequacy of procedures for authorisation of transactions, internal review procedures
over the parent company’s and group’s compliance with regulatory requirements.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Matthew Buckingham BSc ACA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
28 September 2021
42
Principal Accounting Policies
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and those parts of the Companies Act 2006 that are relevant to companies which apply IFRS.
The Company has elected to prepare its Parent Company financial statements in accordance with IFRS also, these are presented
alongside the Group Disclosures throughout the accounts. As detailed in the Director’s Report the Directors continue to adopt
the going concern basis on preparing the financial statements and accounts.
The consolidated financial statements are presented in sterling and all values are rounded the nearest thousand (£’000) except
where otherwise indicated.
The following Standards and Interpretations, which are relevant to the Group but have not been applied during the year, were in
issue but not yet effective, none are expected to have a material impact on the financial results:
Amendments to IAS 16
Amendments to IAS 37
Amendments to IAS 1
Framework Pronouncement
IAS
Proceeds before intended use
IAS
IAS
IFRS
Onerous contracts – cost of
fulfilling a contract
Classification of liabilities as
current or non-current
Amendments to References to
the Conceptual Framework in
IFRS Standards
New standards adopted
Effective date
Financial period commencing
on/after 1 January 2022
Financial periods commencing
on/after 1 January 2022
Financial periods commencing
on/after 1 January 2022
Financial periods commencing
on/after 1 January 2022
There are no adjustments required to be made to the Company’s financial statements as a result of any new standards, amendments
and IFRIC interpretations.
Significant accounting policies
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 May
2021. Subsidiaries are entities over which the Group has the rights to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. The Group obtains and exercises control of its
subsidiaries through voting rights. Employee Benefit Trusts (“EBT”) are consolidated on the basis that the parent has control as
it bears the risks and rewards of having established the trust, thus the assets and liabilities of the EBT are included on the Group
balance sheet and shares held by the EBT in the Company are presented as a deduction from equity.
All intra-group transactions have been eliminated on consolidation. Unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and:
• represents a separate major line of business or geographical area of operations
•
•
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
is a subsidiary acquired exclusively with a view to resale.
Profit or loss from discontinued operations, including prior year components of profit or loss, is presented in a single amount
in the income statement. This amount, which comprises the post-tax profit or loss of discontinued operations and the post tax
gain or loss resulting from the measurement and disposal of assets classified as held for sale, is further analysed in note 36. The
disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the reporting date
of the latest period presented.
43
Principal Accounting Policies
Business combinations
Business combinations are accounted for by using the acquisition method. The acquisition method involves the recognition at
fair value of all identifiable assets and liabilities, including contingent liabilities of the acquired business, at the acquisition date,
regardless of whether or not they were recorded in the financial statements prior to acquisition. On initial recognition, the assets
and liabilities are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent
measurement in accordance with the Group accounting policies.
Goodwill recognised on business combinations is stated after separate recognition of identifiable intangible assets. It is calculated
as the excess of the sum of a) the fair value of consideration transferred, b) the recognised amount of any non-controlling interest
in the acquiree and c) the acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair
values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount
(ie gain on a bargain purchase) is recognised in profit or loss immediately.
Acquisition costs are expensed through the income statement as incurred.
An intangible asset acquired in a business combination is deemed to have a cost to the Group equal to its fair value at the
acquisition date. The fair value of the intangible asset reflects market expectations about the probability that the future economic
benefits embodied in the asset will flow to the Group.
Where an intangible asset is separable, but only together with a related tangible or intangible asset, and the individual fair values
of the assets in the group are not reliably measurable, the group of assets is recognised as a single asset separately from goodwill.
Where the individual fair value of the complementary assets are reliably measurable, the Group recognises them as single assets
provided the individual assets have similar useful lives.
Goodwill
Goodwill represents the future economic benefits arising from business combinations that are not individually identified and
separately recognised. Goodwill is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated
impairment losses.
There is no re instatement of goodwill that was amortised prior to transition to IFRS. Goodwill previously written off to reserves
is not written back to the income statement on subsequent disposal.
Revenue
Contract Revenue
The Group recognises revenue under IFRS 15. Revenue is recognised when control of the goods or services transfers to the
customer. The Group applies the following five step framework when recognising revenue.
Step 1: Identify the contracts with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue
At the inception of the contract, the Group assesses the goods or services that have been promised to the customer, and identifies
as a performance obligation:
• a good or service (or bundle of goods or services) that is distinct;
• or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the
customer.
Contracts often contain a bundle of goods and services (i.e. a motor with an installation). We determine if a good or service is
distinct where both of the following criteria are met:
•
•
the customer can benefit from the good or service on its own or in conjunction with other readily available resources; and
the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the
contract.
The criteria the Group uses to identify the performance obligations within a contract are:
•
•
the customer must be able to benefit from the goods or services either on its own or in combination with other resources
available to the customer; and
the entity’s promise to transfer the good or service to the customer is separable from other promises in the contract.
44
Principal Accounting Policies
Contract Revenue (continued)
The transaction price is the value that the Group expects to be entitled to from the customer and includes discounts, rebates,
credits, price concessions, incentives, performance bonuses, penalties and liquidated damages, but is not reduced for bad debts.
It is net of any Value Added Tax (VAT) and other sales related taxes. Variable consideration that is dependent on certain events is
included in the transaction price when it is “highly probable” that the variable consideration will occur and it is highly probably
no significant reversal will occur.
Future variable revenue from long-term contracts is constrained to take account of the risk of non-recovery of resulting contract
balances from failure to achieve the respective conditions (e.g. failure to meet a delivery date). When assessing whether variable
consideration is constrained, management use all available information including both historical performance and the status of
ongoing projects. Revenue is recognised over time as the product is being manufactured or a service being provided if any of the
following criteria are met:
• The Group is creating a bespoke item which doesn’t have an alternative use to the Group and the entity has a right to payment
for work completed to date including a reasonable profit.
• The customer controls the asset that is being created or enhanced during the manufacturing process i.e. the customer has the
right to significantly modify and dictate how the product is built during construction.
• Services provided where the customer simultaneously receives and consumes the benefits provided as the Group performs.
Judgement is made when determining if a product is bespoke and the value of revenue to recognise over time as products are being
manufactured. To calculate the amount of revenue to be recognised the Group apply a percentage of completion method. This
method calculates revenue by multiplying the contract revenue by the percentage of costs incurred relative to total estimated costs.
If the criteria to recognise revenue over time is not met then revenue is recognised at a point in time when the customer obtains
control of the asset and the performance obligation is satisfied. The customer obtains control of the asset when the customer can
direct the use of the asset and obtain the benefits from the asset. The majority of revenue across all our operating segments is
currently recognised at a point of time, however this can vary depending on the nature of the contracts in any year.
Significant original equipment contracts can take up to 12 months to complete from the start of the manufacturing process. As
the period of time between customer payment and performance will always be one year or less, the Group applies the practical
expedient in IFRS 15.63 and does not adjust the promised amount of consideration for the effects of financing.
In obtaining contracts, the Group may incur a number of incremental costs, such as commissions paid to sales staff. As the
amortisation period of these costs, if capitalised, would be less than one year, the Group makes use of the practical expedient in
IFRS 15.94 and expenses them as they incur.
A contract asset/liability is recognised where payment is received in arrears/advance of the revenue recognised in meeting
performance obligations.
Non-contract revenue
Factors the Group considers when determining the point in time when control of the asset has passed to the customer and revenue
recognised include:
1. The Group has a right to payment;
2. Legal title is transferred to the customer;
3. Physical possession of the asset has been transferred to the customer;
4. The customer has the significant risks and rewards of ownership; and
5. The customer has accepted the asset.
Control normally passes and revenue recognised when the goods are either dispatched or delivered to the customer (in accordance
with the terms and conditions of the sale) or the installation and testing is completed.
Dilapidations
When there is reasonable certainty of the cash outflow in respect of dilapidations this is provided for within accruals in the
financial statements. Where there is significant uncertainty in respect of the amount or timing of the payment of dilapidations,
this is included within provisions.
Dividends
Dividends are recognised when the shareholders right to receive payment is established. Dividend distributions payable to equity
shareholders are included in “other short term financial liabilities” when the dividends are approved in a general meeting prior to
the balance sheet date. Interim dividends are recognised when paid.
45
Principal Accounting Policies
Exceptional items
Operating costs which are material by virtue of their size or incidence and are not expected to be recurring are disclosed as
exceptional items. Exceptional costs comprise acquisition and restructuring costs as set out in note 4.
Non-underlying items
Non-underlying costs for the year include amortisation of acquired intangibles, share based payment charge, acquisition related
expenses, and restructuring costs as set out in note 4.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. Assets held under right of
use assets are depreciated over their expected useful lives on the same basis as owned assets or, were shorter, over the term of
the relevant lease.
Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the income statement. The gain or loss arising from the sale is included in administrative
expenses in the income statement.
Depreciation
Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment other than
freehold land by equal annual instalments over their estimated useful economic lives. The rates/periods generally applicable are:
Buildings
Plant and machinery
Equipment and motor vehicles
2.0% – 4.0%
6.7% - 20%
12.5% - 33%
Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term.
Material residual value estimates are updated as required, but at least annually.
Impairment testing of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include goodwill, and those intangible assets with an indefinite
useful life are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged
pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed
for indications that an impairment loss previously recognised may no longer exist. Discount factors are determined individually
for each cash generating unit and reflect current market assessments at the time value of money and asset-specific risk factors.
If the impairment is subsequently reversed, the carrying amount, except for goodwill, is increased to the revised estimate of its
recoverable amount but limited to the carrying amount that would have been determined had no impairment been recognised.
Impairment losses in respect of goodwill are not reversed.
Leased assets
In the prior year the Group applied IFRS 16 using the modified retrospective approach.
For any new contracts entered into the Group considers whether a contract is or contains a lease. A lease is defined as ‘a
contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for
consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
46
Principal Accounting Policies
Leased assets (continued)
•
•
•
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group
the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has
the right to direct ‘how and for what purpose’ the asset is used.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-
use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred
by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in
advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for
impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.
The incremental borrowing rate has been determined by looking at historical borrowing rates and adjusting these to reflect the
term of the lease, economic environment, and type of asset being leased. Lease payments included in the measurement of the
lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.
On transition to IFRS 16 Leases, incremental borrowing applied to leases fell in the range of 3.6% - 5.6% depending on the
nature and term of the lease.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of
recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss
on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment.
Investments
Investments in subsidiary undertakings and participating interests are stated at cost less provision for impairment where necessary
to reduce book value to recoverable amount. Cost is purchase price.
Investment income is recognised on a received basis.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using
the first in, first out cost formula. Cost includes materials, direct labour and an attributable proportion of manufacturing overheads
based on normal levels of activity. Net realisable value is the estimated selling price in the ordinary course of business less any
applicable selling expenses.
Finance income/costs
Interest is recognised using the effective interest method, which calculates the amortised cost of a financial asset and allocates the
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying amount of the financial asset.
47
Principal Accounting Policies
Taxation
Current tax is the tax currently payable based on taxable profit for the year.
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive
income or directly in equity.
Calculation of current tax is based on tax rates and laws that have been enacted or substantially enacted by the end of the
reporting period.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on
the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is
not provided if the reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not
occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the
Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. The assessment of the probability of future taxable income in
which deferred tax assets can be utilised is based on the Group’s latest approved budget forecast, which is adjusted for significant
non-taxable income and expenses and specific limits to the use of any unused tax loss or credit.
The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive
forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time
limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal
or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. All
unused tax losses and credits have been recognised in the year as management believes that use of the deferred tax asset created
is probable.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the consolidated income statement,
except where they relate to items that are charged or credited to other comprehensive income or directly to equity in which case
the related deferred tax is also charged or credited directly to other comprehensive income or equity.
The group has accounted for research and development expenditure tax credits above operating profit.
Intangible assets
i) Order book and customer relationships
Customer lists acquired in a business combination that qualify for separate recognition are recognised as intangible assets at
their fair values.
The useful lives for these intangible assets are finite.
These intangible assets are amortised on a straight-line basis over the following periods:
• Order book
• Customer relationships
- Period of order cover
- Up to 10 years
The amortisation charge is shown within amortisation of intangibles in the income statement.
ii) Software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific
software.
The useful lives for these intangible assets are finite.
Software is amortised over three years and the amortisation charge is shown within administrative expenses in the income
statement.
iii) Brand
Brand is amortised on a straight line basis of between 10 and 15 years and the amortisation charge is shown within
administrative expenses in the income statement. The useful lives for these intangible assets are finite.
iv) Internally generated development costs
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it
is incurred.
48
Principal Accounting Policies
Intangible assets (continued)
Other intangible assets include capitalised development costs incurred in the development of new products and process
development. They are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over
their estimated useful life. Management assess the useful life of group intangible assets to be in the range of three to ten years.
To distinguish any research-type project phase from the development phase, it is the Group’s accounting policy to require a
detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into the
Group’s overall budget forecast as the capitalisation of development costs commences. This ensures that managerial accounting,
impairment testing procedures and accounting for internally-generated intangible assets is based on the same data.
The Group’s management also monitors whether the recognition requirements for development costs continue to be met and an
assessment made of its recoverability. This is necessary as the economic success of any product development is uncertain and
may be subject to future technical problems after the time of recognition.
Costs that are directly attributable to the development phase of technology are recognised as an intangible asset, provided they
meet the following recognition requirements:
•
•
•
•
•
•
completion of the intangible asset is technically feasible so that it will be available for use or sale
the Group intends to complete the intangible asset and use or sell it
the Group has the ability to use or sell the intangible asset
the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market
for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used
in generating such benefits
there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset,
and
the expenditure attributable to the intangible asset during its development can be measured reliably.
For a project meeting these criteria, subsequent costs incurred will be capitalised until the product or process is available for use,
at which point amortisation commences on a straight line basis over the product’s estimated useful life, generally 3 – 8 years.
The useful lives for these intangible assets are finite. Where businesses are in start up or have a specific contract covering the
amortisation then a period longer than 8 years could be used. Amortisation costs are shown within administrative expenses.
Development costs not meeting the criteria for capitalisation are expensed as incurred.
The cost of internally generated development costs comprises all directly attributable costs necessary to create, produce, and
prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee
costs incurred on project development along with an appropriate portion of relevant overheads.
Borrowing costs
Borrowing costs primarily comprise interest on the Group’s borrowings. Borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset, are capitalised as part of the cost of that asset when it is probable
that they will result in future economic benefits and the costs can be measured reliably. All other borrowing costs are expensed
in the period in which they are incurred and reported within “finance costs”. No general borrowing costs have been capitalised
in relation to qualifying assets.
Equity
Share capital represents the nominal value of shares that have been issued.
When the Company purchases its own shares, the consideration is deducted from equity (attributable to the Company’s equity
holders until the shares are either cancelled or issued) as an investment in own shares reserve. Such shares are held at cost.
Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax benefits.
Capital redemption reserve represents the nominal value of shares cancelled.
Foreign currency translation differences arising on the translation of the Group’s foreign entities are included in the translation
reserve.
Merger reserve was created on the acquisition of Hayward Tyler Group PLC.
Other reserves were created on redemption of preference shares. The gain on disposal of non-controlling interest in subsidiary
company regarding the Magnetica acquisition is also included here. Retained earnings include all current and prior period
retained profits. It also includes charges related to share-based employee remuneration.
All transactions with owners of the parent are recorded separately within equity.
49
Principal Accounting Policies
Financial assets and liabilities
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
In the periods presented the Group does not have any financial assets categorised as FVOCI. The classification is determined by
both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance
income or other financial items, except for impairment of trade receivables which is presented separately in the income statement.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
•
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most
other receivables fall into this category.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are
categorised at fair value through profit and loss. Further, irrespective of business model, financial assets whose contractual cash
flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into
this category.
Impairment of financial assets
IFRS 9 impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit
loss (ECL) model’. This replaced the ‘incurred loss model’ in IAS 39. Instruments within the scope of the new requirements
included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets
recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are
not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead, the Group considers
a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current
conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit
risk (‘Stage 1’) and
50
Principal Accounting Policies
Financial assets and liabilities (continued)
Impairment of financial assets (continued)
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not
low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for
the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected
life of the financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records
the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial instrument. The Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit losses using a provision matrix.
The Group assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics
they have been grouped based on the days past due. Refer to Note 24 Financial Instruments for a detailed analysis of how the
impairment requirements of IFRS 9 are applied.
Classification and measurement of financial liabilities
The Group’s financial liabilities include trade payables, other payables, borrowings and lease liabilities. The Group has derivative
financial instruments which can be either an asset or liability depending on the value of the underlying asset.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and
financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or
loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included
within finance costs or finance income.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held on call with banks and bank overdrafts. Bank overdrafts are
shown within borrowings in current liabilities on the balance sheet. Cash equivalents are short term, highly liquid investments
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Post-employment benefits, short-term employee benefits and share-based employee remuneration
Post employee benefits
Hayward Tyler Group provides post-employment benefits through a defined benefit plan. This plan formed part of the business
combination.
The Group provides post-employment benefits through defined benefit plans as well as various defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into an independent entity. The
Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. The
contributions are recognised as an employee benefit expense when they are due.
Plans that do not meet the definition of a defined contribution plan are defined benefit plans. Under the Group’s defined benefit
plans, the amount of pension benefit that an employee will receive on retirement is defined by reference to the employee’s
length of service and final salary. The legal obligation for any benefits remains with the Group, even if plan assets for funding
the defined benefit plan have been set aside. Plan assets may include assets specifically designated to a long-term benefit fund as
well as qualifying insurance policies.
51
Principal Accounting Policies
Post-employment benefits, short-term employee benefits and share-based employee remuneration
(continued)
The asset recognised in the statement of financial position for defined benefit plans is the present value of the fair value of
plan assets less the defined benefit obligation (DBO) at the reporting date. The net surplus at the end of the year is £1.3 million
(2020: £1.6 million) which is deemed recoverable and therefore recognised in full. The unconditional right condition in IFRIC14
is satisfied as the Company has an unconditional right to a refund of surplus after the last pensioner dies, assuming the Plan
continues indefinitely.
Management estimates the DBO annually with the assistance of independent actuaries. This is based on standard rates of inflation,
salary growth rate and mortality. Discount factors are determined close to each year-end by reference to high quality corporate
bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the
terms of the related pension liability.
Service cost on the Group’s defined benefit plan is included in employee benefits expense. Employee contributions, all of which
are independent of the number of years of service, are treated as a reduction of service cost. Net interest expense on the net
defined benefit liability is included in finance costs. Gains and losses resulting from remeasurements of the net defined benefit
liability are included in other comprehensive income.
Short-term benefits
Short-term employee benefits, including holiday entitlement, are current liabilities included in pension and other employee
obligations, measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.
Share-based employee remuneration
The Group operates equity-settled share-based remuneration plans for its key management personnel. None of the Group’s plans
are cash-settled.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by
reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions.
All share-based remuneration is ultimately recognised as an expense in the income statement with a corresponding credit to
share-based payment reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from
previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the
current period.
The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share
capital up to the nominal (or par) value of the shares issued with any excess being recorded as share premium.
Foreign currencies
The individual Financial Statements of each Group entity are presented in the currency in the primary economic environment
of which the entity operates (its functional currency). For the purposes of the consolidated financial statements, the results and
financial position are presented in sterling (£). Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at
the balance sheet date. Foreign exchange gains and losses resulting from the remeasurement of monetary items denominated in
foreign currency at year-end exchange rates are recognised in profit or loss. Non-monetary items that are measured at historical
cost in a foreign currency are translated at the exchange rate at the date of the transaction.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in profit or loss in the period in which they arise. Exchange differences
on non-monetary items are recognised in other comprehensive income to the extent that they relate to a gain or loss on that
non-monetary item recognised in other comprehensive income, otherwise such gains and losses are recognised in profit or loss.
52
Principal Accounting Policies
Foreign currencies (continued)
The assets and liabilities in the financial statements of foreign subsidiaries and related goodwill are translated at the rate of
exchange ruling at the balance sheet date. Income and expenses are translated at a rate which is considered to be approximate
to the rate prevailing at the date of the transaction. The exchange differences arising from the retranslation of the opening net
investment in subsidiaries are recognised in other comprehensive income and accumulated in the “translation reserve” in equity.
On disposal of a foreign operation the cumulative translation differences are reclassified from equity to profit or loss when the
gain or loss is recognised.
Segmental reporting
A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues
and incur expenses whose operating results are regularly reviewed by the Chief Executive, who is considered to be the chief
operating decision maker. The Chief Executive focuses on information by operating division and the Group has therefore
identified reportable operating segments comprising Energy-EPM, Energy-PRSE and Medical-MII.
The Chief Executive also reviews information by geographical area and whilst this is considered supplementary to the operating
information, it is disclosed in the financial statements to provide additional information.
Government grants
The group receives government grants for research and development, plus has received support throughout the coronavirus
epidemic in the UK from the Coronavirus Job Retention Scheme, and US Cares Act.
A government grant is recognised only when there is reasonable assurance that (a) the Group will comply with any conditions
attached to the grant and (b) the grant will be received.
Government grants in respect of capital expenditure are credited to a deferred income account and are released to the income
statement by equal annual instalments over the expected useful lives of the relevant assets. Government grants in respect of
assistance of a revenue nature are credited to the income statement in the same period as the related expenditure.
Hayward Tyler Limited (“HTL”), based in Luton, UK, was awarded a £3.5 million grant from the Regional Growth Fund
(“RGF”) pre-acquisition by AVG. The deferred income liability is reduced by grant income that is recognised in the consolidated
income statement. This grant income is included in operating charges as a deduction from related research, development and
training expenses.
Provisions and contingent liabilities
Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic
resources from the Group and amounts can be estimated reliably. A present obligation arises from the presence of a legal or
constructive commitment that has resulted from past events. Restructuring provisions are recognised only if a detailed formal
plan for the restructuring has been developed and implemented, or management has announced the plan’s main features to those
affected by it.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a
number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class
of obligations as a whole. In those cases where the possible outflow of economic resources as a result of present obligations is
considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination.
Critical accounting judgements and key sources of estimation uncertainty
When preparing the financial statements, management makes a number of judgements, estimates and assumptions about the
recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The are no significant judgements made by management in applying the accounting policies of the Group in the financial
statements.
Estimation uncertainty
Information about estimates and assumptions that may have the most significant effect on recognition and measurement of assets,
liabilities, income and expenses is provided below. Actual results may be substantially different.
53
Principal Accounting Policies
Critical accounting judgements and key sources of estimation uncertainty (continued)
Revenue and margin on contracts
For sales of goods where we judge revenue should be recognised over time, the Group applies the percentage of completion
method. This method calculates revenue by multiplying the contract revenue by the percentage of costs incurred relative to
total estimated costs. Management assesses contract revenue using the expected value method which is based on the range of
possible outcomes and the probabilities of each outcome. Estimates of the total contract cost take into consideration historical
costs on similar products and services, which is then updated to take into consideration changes to supplier prices, movements
in exchange rates, and managements latest view on remaining work required to complete a contract.
Fair value of consideration
During the period, management acquired 58.1% shareholding in Magnetica Limited in exchange for the transfer of its 98.5%
owned investment in Scientific Magnetics Limited which became a subsidiary of Magnetica post acquisition.
IFRS 3 Business Combinations requires that consideration is valued at its fair value. We have determined the fair value through
a discounted cash flow calculation based on the latest Scientific Magnetics Limited forecasts and those of its wholly owned
subsidiary, Tecmag Inc.
Management have prepared detailed cash flow forecasts for the 2 year period post-acquisition, and applied longer-term growth
assumptions. An appropriate discount rate has been determined using the capital asset pricing model, which calculates a weighted
average costs of capital by comparison to similar quoted businesses.
Fair value of acquired intangibles
Magnetica have developed MRI technologies relating to asymmetric magnets, gradient coils and RF coils. The Group acquired
Magnetica with the purpose of developing a compact MRI systems, with components manufactured by Magnetica plus other
Group entities.
Given the product is only partially developed, there are no historical revenue streams to base an income-based valuation on,
consequently, we have chosen to value based on current replacement cost. Determining the current replacement cost is largely
based on historical development costs incurred by Magnetica and updated to current value.
Deferred tax assets
Management have recognised a deferred tax asset based on expected losses expected to be utilised over the next 5 year period.
The assessment of this utilisation is based on the Group’s latest approved budget forecast, which is adjusted for significant non-
taxable income and expenses and specific limits to the use of any unused tax loss or credit. Further details relating to deferred
tax assets are in note 25.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the
goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise
from the cash-generating unit and to apply a suitable discount rate in order to calculate present value. The assumptions and
sensitivities applied by management in determining whether there is any impairment of goodwill are set out in note 12.
Recoverability of contract assets and trade receivables
Management estimate the recoverable amount of balances relating to ongoing contracts that are incomplete at the date of approval
of the financial statements. In particular in relation to claims the Directors prepare a best estimate of the amount expected to be
recovered at the balance sheet date by reference to ongoing negotiations with customers. Management periodically revisit the
claim and their assessment of the amount expected to be recovered. Contract assets and trade receivables are detailed in note 17.
The value of contract assets at 31 May 2021 was £20.5m. Intercompany balances and investments held by the Company have
been reviewed by Management by reviewing future cash flows and despite Covid 19 are still considered to be recoverable.
Warranties
The amount recognised for warranties for which customers are covered for the cost of repairs is estimated based on management’s
past experience, current knowledge and future expectation that defects may arise. The value of warranty provisions at 31 May
2021 was £1.5 million (note 19).
54
Principal Accounting Policies
Critical accounting judgements and key sources of estimation uncertainty (continued)
Defined benefit pension liability
Management estimates the defined benefit pension liability annually with the assistance of independent actuaries; however, the
actual outcome may vary due to estimation uncertainties. The estimate of its defined benefit pension gross liability of £13.1
million (2020: £13.5 million) is based on standard rates of inflation and mortality. The estimate does not include anticipation of
future salary increases as there are no members with benefits related to future salary progression. Discount factors are determined
close to each period end by reference to high quality corporate bonds that are denominated in the currency in which the benefits
will be paid and that have terms to maturity approximating to the terms of the related pension liability. Estimation uncertainties
exist particularly with regard to medical cost trends, which may vary significantly in future appraisals of the Group’s defined
benefit pension obligations. The value of the defined benefit pension asset at 31 May 2021 was £1.3 million (2020: £1.6million).
Further details of the pension scheme are in note 28.
55
Consolidated Income Statement
For the year ended 31 May 2021
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit before amortisation of acquired intangibles, other
non-underlying items and exceptional items
Amortisation of acquired intangibles
Share based payment
Acquisition costs
Restructuring costs
Other exceptional
Operating profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit after taxation from continuing operations
Profit after taxation from discontinued operations
Profit for the financial year
Profit is attributable to:
Owners of Avingtrans PLC
Non-controlling interest
Total
Earnings per share:
From continuing operations
– Basic
– Diluted
From continuing and discontinuing operations
– Basic
– Diluted
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
Items that will not be subsequently be reclassified to profit or loss
Remeasurement of defined benefit liability (note 28)
Income tax relating to items not reclassified
Items that may/will subsequently be reclassified to profit or loss
Exchange differences on translation of foreign operations
Total comprehensive income for the year attributable to equity shareholders
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
56
Note
2021
£’000
2020
£’000
2
98,516
91,961
(68,586)
(67,340)
29,930
24,621
(3,024)
(20,821)
(3,392)
(20,625)
13
27
35
2
5
6
3
9
35
36
11
11
11
11
8,188
(1,008)
(133)
(234)
(771)
43 –
6,085
73
(711)
5,447
(383)
5,064
22,136
27,200
27,366
(166) –
27,200
15.9p
15.6p
85.4p
83.6p
2021
£’000
27,200
(662)
49
(1,162)
25,425
3,249
(2,004)
(103)
(294)
(244)
60
38
(711)
(69)
(28)
(97)
1,483
1,386
1,386
1,386
(0.3)p
(0.3)p
4.4p
4.3p
2020
£’000
1,386
58
(43)
120
1,521
Consolidated Balance Sheet
For the year ended 31 May 2021
Note
Non current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax
Pension and other employee obligations
Current assets
Inventories
Trade and other receivables: falling due within one year
Trade and other receivables: falling due after one year
Current tax asset
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Current tax liabilities
Provisions
Derivatives
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax
Contingent consideration
Other creditors
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Translation reserve
Merger reserve
Other reserves
Investment in own shares
Retained earnings
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity
12
13
14
25
28
16
17
17
9
18
20
23
22
9
19
22
22
23
25
21
26
34
2021
£’000
21,222
14,464
25,281
1,767
1,284
64,018
10,076
36,010
1,798 –
633
30,078
2020
£’000
23,459
13,834
34,445
1,241
1,646
74,625
13,390
36,910
1,221
5,088
78,595
142,613
56,609
131,234
(26,587)
(1,310)
(2,160)
(672)
(1,742)
(144)
(30,308)
(2,125)
(6,005)
(70)
(5,514)
(36)
(32,615)
(44,058)
(3,368)
(2,965)
(3,456)
–
(1,246)
(3,965)
(9,340)
(2,460)
(256)
(1,247)
(11,035)
(17,268)
(43,650)
(61,326)
98,963
69,908
1,599
15,347
1,299
(732)
28,949
1,457
(4,235)
53,614
97,298
1,665
98,963
1,588
14,970
1,299
430
28,949
180
(4,235)
26,727
69,908
–
69,908
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 28 September 2021 and signed on
its behalf by:
S M King, Director. Company number: 1968354
57
Company Balance Sheet
For the year ended 31 May 2021
Note
Non current assets
Investments
Current assets
Trade and other receivables: amounts falling due within one year
Current tax asset
Cash at bank and in hand
Total assets
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Non-current liabilities
Borrowings
Contingent consideration
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Other reserves
Profit and loss account
Total equity attributable to equity holders of the parent
15
17
18
20
22
22
26
2021
£’000
40,151
40,151
12,745
– –
24,557
37,302
77,453
(575)
(181)
(756)
(249)
–
(249)
2020
£’000
35,939
35,939
31,804
1,658
33,462
69,401
(477)
(181)
(658)
(370)
(256)
(626)
(1,005)
(1,284)
76,448
68,117
1,599
15,347
1,299
28,949
237
29,017
76,448
1,588
14,970
1,299
28,949
180
21,131
68,117
The parent company has taken the exemption conferred by S.408 Companies Act 2006 not to publish the profit and loss account
of the parent company with these consolidated accounts. The loss dealt with in the parent company’s financial statements was
£2,246k (2020: loss of £649k).
The financial statements were approved by the Board of Directors and authorised for issue on 28 September 2021 signed on its
behalf by:
S M King
Director
Company number: 01968354
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
58
Consolidated Statement of Changes in Equity
For the year ended 31 May 2021
Capital
Share redemp-
Invest-
ment in
Share premium
capital account
£’000
£’000
tion Merger
reserve
£’000
reserve
£’000
Trans-
lation
Other
reserve reserves
£’000
£’000
own Retained
of the
shares earnings Group
£’000
£’000
£’000
owners Non-con-
trolling
Total
interest Equity
£’000
£’000
Total
Attribut-
able
At 1 June 2019
1,568
14,018
1,299
28,949
310
180
(3,435)
26,405
69,294
Ordinary shares issued
Dividends paid
Investment in own shares
Share-based payments
Total transactions
with owners
Profit for the year
Other comprehensive income
Actuarial gain for the year
on pension scheme
Deferred tax on actuarial
movement on pension scheme
Exchange gain
Total comprehensive income
for the year
Balance at
31 May 2020
20
–
–
–
952
–
–
–
20
952
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120
120
–
–
–
–
–
–
–
–
–
–
–
–
–
972
(1,191)
(1,191)
(800)
–
(800)
–
112
112
(800)
(1,079)
(907)
–
1,386
1,386
–
–
–
–
58
58
(43)
–
(43)
120
1,401
1,521
–
–
–
–
–
–
–
–
–
–
–
69,294
972
(1,191)
(800)
112
(907)
1,386
58
(43)
120
1,521
1,588
14,970
1,299
28,949
430
180
(4,235)
26,727
69,908
–
69,908
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
59
Consolidated Statement of Changes in Equity
For the year ended 31 May 2021
Capital
Share redemp-
Invest-
ment in
Share premium
capital account
£’000
£’000
tion Merger
reserve
£’000
reserve
£’000
Trans-
lation
Other
reserve reserves
£’000
£’000
own Retained
of the
shares earnings Group
£’000
£’000
£’000
owners Non-con-
trolling
Total
interest Equity
£’000
£’000
Total
Attribut-
able
At 1 June 2020
1,588
14,970
1,299
28,949
430
180
(4,235)
26,727
69,908
Ordinary shares issued
Magnetica acquisition
Gain on disposal of
non-controlling interest
in subsidiary
Share-based payments
Total transactions with owners
Profit for the year
Other comprehensive income
Actuarial gain for the year
on pension scheme
Deferred tax on actuarial
movement on pension scheme
Exchange loss
Total comprehensive income
for the year
Balance at
31 May 2021
11
–
–
–
11
–
–
–
–
–
377
–
–
–
377
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,162)
(1,162)
–
–
1,278
–
1,278
–
–
–
–
–
–
–
388
–
–
–
1,831
69,908
388
1,831
–
133
133
1,278
133
–
–
1,278
133
1,799
1,831
3,630
27,366
27,366
(166)
27,200
(662)
(662)
49
–
49
(1,162)
–
–
–
(662)
49
(1,162)
–
–
–
–
–
–
–
–
–
–
26,753
25,591
(166)
25,425
1,599
15,347
1,299
28,949
(732)
1,458
(4,235)
53,614
97,298
1,665
98,963
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
60
Company Statement of Changes in Equity
For the year ended 31 May 2021
Share
capital
£’000
1,568
20
–
–
20
–
–
Share
premium
account
£’000
14,018
952
–
–
952
–
–
Capital
redemp
-tion
reserve
£’000
Merger
reserve
£’000
Other
reserves
£’000
Retained
earnings
£’000
1,299
28,949
180
22,859
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
68,873
972
–
(1,191)
(1,191)
112
112
(1,079)
(107)
(649)
(649)
(649)
(649)
1,588
14,970
1,299
28,949
180
21,131
68,117
At 1 June 2019
Ordinary shares issued
Dividends paid
Share-based payments
Total transactions
with owners
Loss for the year
Total comprehensive
expense for the year
Balance at
31 May 2020
At 1 June 2020
1,588
14,970
1,299
28,949
180
21,131
68,117
Ordinary shares issued
Share-based payments
Total transactions
with owners
Profit for the year
Gain on disposal of
non-controlling interest
in subsidiary
Total comprehensive
profit for the year
Balance at
31 May 2021
11
–
11
–
–
–
377
–
377
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57
57
–
133
133
388
133
521
7,753
7,753
–
57
7,753
7,810
1,599
15,347
1,299
28,949
237
29,017
76,448
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
61
Consolidated Statement of Cash Flows
For the year ended 31 May 2021
Operating activities
Cash flows from operating activities
Finance costs paid
Income tax paid
Contributions to defined benefit plan
Net cash inflow/(outflow) from operating activities
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired
Disposal of subsidiary undertaking, net of disposal costs
Finance income
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Note
29
35
35
2021
£’000
6,877
(723)
491
(272)
6,373
341
26,636 –
73
(884)
(1,532)
– –
2020
£’000
2,919
(1,189)
(1,527)
(254)
(51)
720
38
(760)
(3,984)
Net cash generated from/(used in) investing activities
24,634
(3,986)
Financing activities
Equity dividends paid
Repayments of bank loans
Repayment of leases
Proceeds from issue of ordinary shares
Proceeds from borrowings
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes on cash
–
(4,397)
(1,993)
388
149
(5,853)
25,154
4,693
(111)
Cash and cash equivalents at end of year
18
29,736
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
(1,191)
(675)
(2,200)
972
3,807
713
(3,324)
8,053
(36)
4,693
62
Company Statement of Cash Flow
For the year ended 31 May 2021
Operating activities
Cash flows from operating activities
Finance costs paid
Income tax received/(paid)
Net cash outflow from operating activities
Investing activities
Repayment from subsidiary undertakings
Disposal of subsidiary undertakings
Equity dividends received
Finance income
Net cash generated from investing activities
Financing activities
Equity dividends paid
Repayments of bank loans
Proceeds from issue of ordinary shares
Net cash outflows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
30
35
2021
£’000
(2,882)
(8)
62
(2,828)
15,008
17 –
10,000 –
436
25,461
–
(122)
388
266
22,899
1,658
18
24,557
The principal accounting policies and notes on pages 43 to 96 form part of these financial statements.
2020
£’000
(3,483)
(14)
(112)
(3,609)
4,920
674
5,594
(1,191)
(168)
972
(387)
1,598
60
1,658
63
Notes to the Annual Report
For the year ended 31 May 2021
1
Corporate information
The consolidated financial statements of Avingtrans plc and its subsidiaries (collectively the Group) for the year ended 31 May
2021 were authorised for issue in accordance with a resolution of the directors on 28 September 2021. Avingtrans plc (the parent)
is a limited company incorporated in England & Wales, whose shares are publicly traded on AIM. The registered office is located
at Chatteris Business Park, Chatteris, Cambridgeshire PE16 6SA. The Group is principally engaged in the provision of highly
engineered components, systems and services to the energy, medical and infrastructure industries worldwide.
2
Segmental analysis
For management purposes, the Group is currently organised into three main segments Energy-EPM, Energy-PSRE and Medical-
MII. The basis on which the Group reports to the Chief Executive.
Principal activities are as follows:
• Energy – EPM, built around Hayward Tyler which designs, manufactures and services performance-critical electric motors
and pumps for the global energy industry, as both an OEM supplier and a trusted through life support partner. EPM continues
to develop its nuclear installed base (civil, defence and national security) – for life extension applications - and its offering
to the hydrocarbon market sectors.
• Energy – PSRE, is the design, manufacture, integration and servicing of an extensive product offering including, gas
compressors, pressure vessels, blast doors, and containers. The primary strategy is to develop a comprehensive offering to
the nuclear decommissioning and reprocessing markets.
• Medical – MII, is the design and manufacture of innovative equipment for the medical, science and research communities.
Including cutting-edge products for medical diagnostic equipment; high performance pressure, vacuum vessels and composite
materials for research organisations; superconducting magnets and helium-free cryogenic systems in magnetic resonance
imaging (MRI), nuclear magnetic resonance (NMR).
Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated
financial statements as presented below:
Medical
MII
£’000
Unallocated
central items
£’000
Year ended 31 May 2021
Original Equipment
After Market
Revenue
Operating profit/(loss)
Net finance income/(expense)
Taxation credit/(charge)
Profit/(loss) after tax from continuing operations
Segment non-current assets
Segment current assets
Segment liabilities
Net assets
Non-current asset additions
Intangible assets
Tangible assets
Energy
EPM
£’000
15,427
35,956
51,383
2,833
(390)
191
2,634
44,164
34,940
79,104
(9,381)
69,723
75
1,544
1,619
Energy
PSRE
£’000
32,942
4,629
37,571
4,312
(194)
(651)
3,467
11,525
15,045
26,570
(12,856)
13,714
318
663
981
9,367
195
9,562
(302)
(45)
1
(346)
8,329
3,711
12,040
(6,331)
5,709
3,610
105
3,715
Other income statement items:
Depreciation and amortisation
(2,409)
(1,119)
(788)
Total
£’000
57,736
40,780
98,516
6,085
(638)
(383)
5,064
64,018
78,595
142,613
(43,650)
–
–
–
(758)
(9)
76
(691)
–
24,899
24,899
(15,082)
9,817
98,963
–
–
–
–
4,003
2,312
6,315
(4,316)
Unallocated assets/ (liabilities) consist primarily of interest-bearing assets and liabilities and income tax assets and liabilities.
Medical MII results include the acquisition of Magnetica AU which contributed £47k Group revenue and £418k loss after tax
respectively (note 35).
64
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
2
Segmental analysis (continued)
Year ended 31 May 2020
Original Equipment
After Market
Revenue
Operating profit/(loss)
Net finance (expense)/ income
Taxation
Profit/ (loss) after tax from
continuing operations
Segment non-current assets
Segment current assets
Segment liabilities
Net assets
Non-current asset additions
Intangible assets
Tangible assets
Other income statement items:
Depreciation and amortisation
Energy
EPM
£’000
12,780
36,530
49,310
1,261
(549)
(84)
628
46,933
25,072
72,005
(3,845)
Energy
PSRE
£’000
28,032
2,740
30,772
366
(51)
(124)
191
22,978
23,613
46,591
(29,875)
Medical
MII
£’000
Unallocated
entral items
£’000
Total
£’000
52,691
39,270
91,961
604
(673)
(28)
(97)
74,625
56,609
–
–
–
(697)
(11)
59
(649)
–
4,755
4,755
(17,979)
131,234
(61,326)
11,879
–
11,879
(326)
(62)
121
(267)
4,714
3,169
7,883
(9,627)
68,160
16,716
(1,744)
(13,224)
69,908
1,697
1,574
3,271
336
2,292
2,628
118
118
236
(2,401)
(604)
(747)
–
–
–
–
2,151
3,984
6,135
(3,752)
Unallocated assets/ (liabilities) consist primarily of interest-bearing assets and liabilities and income tax assets and liabilities.
The following tables provides an analysis of the Group’s revenue by destination and the location of non-current assets by
geographical market:
United Kingdom
Europe (excl. UK)
United States of America
Africa & Middle East
Americas & Caribbean (excl. USA)
China
Asia Pacific (excl. China)
Antarctica
2021
Revenue
£’000
43,594
8,407
18,619
2,137
3,523
11,137
10,606
493
98,516
The Group’s revenue disaggregated by pattern of revenue recognition is as follows:
Over time
Point in time
2020
Revenue
£’000
2021
2020
Non-current Non-current
Assets
£’000
Assets
£’000
39,816
9,808
20,532
2,482
4,155
8,325
6,843
–
91,961
27,485
– –
27,544
– –
– –
2,059
3,879
–
39,704
29,587
2,396
51
–
60,967
71,738
2021
£’000
61,048
37,468
98,516
2020
£’000
41,998
49,963
91,961
65
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
2
Segmental analysis (continued)
The Group had no single external customer which represented more than 10% of the Group’s revenue in the current or prior year.
Prior year figures have been restated throughout the notes due to PB moving to discontinued operations.
Contract assets and liabilities
Contract assets:
Energy – EPM
Energy – PSRE
Contract liabilities:
Energy – EPM
Energy – PSRE
31 May 2021 1 June 2020
£’000
£’000
12,872
7,593
20,465
(1,318)
(3,150)
(4,468)
10,730
4,836
15,566
(2,670)
(2,573)
(5,243)
A contract asset/liability is recognised where payment is received in arrears/advance of the revenue recognised in meeting
performance obligations. At 31 May 2021, a greater proportion of the businesses contracts had payments in arrears, consequently
there has been a increase in contract assets, and decrease in contract liabilities. The increase is payments in arrears is mainly
driven by government customers who typically pay in arrears and don’t have significant advance payments.
Contract liability movement:
1 June
Revenue recognised which was included in the opening balance
Increases due to cash received, excluding amounts recognised in the year
At 31 May
3
Profit before taxation – continuing
Profit before taxation is stated after charging/(crediting):
Depreciation of property, plant and equipment
(Profit)/loss on disposal of property, plant and equipment
Amortisation of internally generated intangible assets
Cost of inventories recognised as an expense
Loss on foreign exchange transactions
Amounts recognised from government grants
Staff costs (note 8)
Charitable donations
Research and development expenditure
2021
£’000
(5,243)
5,243
(4,468)
(4,468)
2021
£’000
3,461
(9)
545
53,890
144
(1,248)
32,462
6
388
2020
£’000
(11,022)
11,022
(5,243)
(5,243)
2020
£’000
3,352
3
403
48,915
47
(75)
33,416
14
553
Discontinued operations would have charged an additional £10,090,000 (2020 £25,079,000) had they been included in the above.
Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the financial statements
Fees payable to the Company’s auditor and its associates for other services:
– Audit of the financial statements of the Company’s subsidiaries and
associates pursuant to legislation
2021
£’000
75
202
2020
£’000
54
196
66
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
4
Adjusted Earnings before interest, tax, depreciation and amortisation
Profit/(loss) before tax from continuing operations
Share based payment expense
Acquisition costs
Restructuring costs
Other exceptionals
Loss on derivatives
Amortisation of intangibles from business combinations
Adjusted profit before tax from continuing operations
Finance income
Finance cost
Loss on derivatives
Adjusted profit before interest, tax and amortisation from business combinations (‘EBITA’)
Depreciation
Amortisation of other intangible assets
Amortisation of contract assets
2021
£’000
5,447
133
234
771
(43) –
109
1,008
7,659
(73)
711
(109)
8,188
3,461
545
310 –
2020
£’000
(69)
103
294
244
8
2,004
2,584
(38)
711
(8)
3,249
3,352
403
Adjusted Earnings before interest, tax, depreciation and amortisation
(‘EBITDA’) from continuing operations
12,504
7,004
The Directors believe that the above adjusted earnings are a more appropriate reflection of the Group performance.
5
Finance income
Bank balances and deposits
Interest from defined benefit pension scheme
Gain arising on the fair value of derivative contracts
6
Finance costs
Amortisation of banking facility arrangement fees
Losses arising on the fair value of derivative contracts
Interest on bank loans and overdrafts wholly repayable within five years
Interest on bank loans and overdrafts wholly repayable after five years
Interest on lease agreements
Group
2021
£’000
2020
£’000
11
27
35
73
5
33
–
38
Group
2021
£’000
2020
£’000
–
144
372
7
188
711
30
8
404
26
243
711
67
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
7
Directors’ emoluments
Particulars of directors’ emoluments from continuing operations are as follows:
Salary
and
Fees
£’000
Benefits
£’000
Bonus
and
benefits
£’000
Long
Term
Incentive
£’000
Total
2021
£’000
Total
2020
£’000
Pension
Total
2021
£’000
Pension
Total
2020
£’000
Non-executive:
R S McDowell
J S Clarke
LJ Thomas
GK Thornton*
Executive:
S McQuillan
S M King
Total emoluments
71
34
34
–
283
231
653
–
–
–
–
149
121
270
–
–
–
–
2
–
2
–
–
–
–
–
–
–
71
34
34
–
434
352
925
73
34
35
31
333
273
779
– –
– –
– –
– –
– –
– –
– –
* GK Thornton resigned from the Board on 14 November 2019.
During 2021 S McQuillan and S M King received a bonus of £345,000 and £365,000 respectively in connection with the
successful completion of the disposal of Peter Brotherhood Limited. These costs have been included as discontinued operations
and therefore excluded from the above table. Thus total 2021 remuneration and remuneration for the highest paid director would
be £1,635,000 (2020: £779,000) and £779,000 (2020: £333,000) respectively.
The non-cash benefits comprise the provision of private health insurance for S McQuillan. The number of Directors who are
accruing benefits under money purchase schemes is nil (2020: nil).
The long term incentive represents the initial interest in the Joint Ownership Scheme (see note 34).
Employers National Insurance Contributions made relating to directors’ emoluments were £140,000 (2020: £116,000).
During 2021 S McQuillan and S M King exercised 250,250 and 209,250 approved share options respectively resulting in paper
capital gains of £191,000 and £157,000 (2020: S McQuillan and S M King exercised 100,000 and 75,000 approved share options
respectively resulting in paper capital gains of £60,000 and £45,000) as set out on page 27. Additionally S M King exercised
39,733 unapproved share options resulting in a taxed gain of £81,000.
68
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
8
Employees
Particulars of employees, including Executive Directors:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
2021
£’000
28,109
2,719
1,501
133
32,462
2020
£’000
28,985
2,890
1,438
103
33,416
Discontinued operations wages and salaries of £4,891,000 (2020 £7,613,000) have not been included in the above note.
The average monthly number of employees (including Executive Directors) during the year was:
Production
Selling and distribution
Administration
2021
Number
2020
Number
388
53
263
704
429
121
184
734
The remuneration of the Directors and Senior Management, who are the key management personnel of the Group, is set out
below in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’.
Short term employee benefits (including NIC)
Post-employment benefits
Share-based payments
9
Taxation
Continuing operations
Current tax
Corporation tax – current year
Corporation tax – prior year
Overseas tax
Total current tax
Deferred tax (note 25)
Deferred tax – current year
Deferred tax – prior year
Deferred tax – rate
Total deferred tax
Tax charge on continuing operations
Tax (credit)/charge on discontinued operations
Total tax (credit)/charge in the year
2021
£’000
1,495
10
76
1,581
2020
£’000
1,194
10
61
1,265
2021
£’000
2020
£’000
6
43
738
787
(241)
(298)
135
(404)
383
(746)
(363)
57
13
(170)
(100)
111
(50)
67
128
28
406
434
Corporation tax is calculated at 19% (2020: 19%) of the estimated assessable profit/loss for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
69
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
9
Taxation (continued)
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before taxation:
Continuing operations
Discontinued operations
Theoretical tax at UK corporation tax rate of 19% (2020: 19%)
Effects of:
Expenditure that is not tax deductible
Un-provided deferred tax differences
Adjustments in respect of prior years
Recognition of previously unrecognised losses
Rate differential on timing differences
Change in deferred tax rate
Differential in overseas tax rate
Total tax charge
2021
£’000
2020
£’000
5,447
21,555
27,002
5,130
(4,671)
2
(288)
(671)
–
135
–
(363)
(69)
1,889
1,820
346
203
(60)
8
(68)
(12)
51
(34)
434
The Group has tax losses carried forward of approximately £22.6 million at 31 May 2021 (2020: £32.6 million) that may be
relievable against future profits. Further details are detailed in note 25.
The Group’s corporation tax assets and liabilities can be summarised as follows:
Current tax assets
Corporation tax
Current tax liabilities
Corporation tax
2021
£’000
633
633
(672)
(39)
2020
£’000
1,221
1,221
(70)
1,151
Corporation tax assets includes refunds due on US taxes and R&D claims made in the UK.
Factors that may affect future tax charges
The substantively enacted UK corporation tax rate at 31 May 2021 and 2020 was 19%. As per the March 2021 budget the tax rate
will increase to 25% by 2023. The deferred tax asset at 31 May 2021 has been calculated based on these rates.
10
Dividends
Interim dividend paid of 0p per ordinary share (2020: 1.4p)
Final dividend paid of 0p per ordinary share (2020: 2.4p)
2021
£’000
–
–
–
2020
£’000
439
752
1,191
The above excludes any proposed dividend not yet paid as disclosed in the strategic report.
70
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
11
Earnings per ordinary share
Basic and diluted earnings per share have been calculated in accordance with IAS 33 which requires that earnings should be
based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue
during the year.
For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive
potential ordinary shares, being the CSOP and ExSOP share options.
Weighted average number of shares – basic
Share option adjustment
Weighted average number of shares – diluted
Profit from continuing operations
Share based payment expense
Acquisition costs
Restructuring costs
Other exceptionals
Loss on derivatives
Amortisation of intangibles from business combinations
Adjusted profit after tax from continuing operations
From continuing operations:
Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Earnings from discontinuing operations:
From discontinuing operations
Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Earnings attributable to shareholders including non-controlling interest
Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
2021
Number
2020
Number
31,855,908
670,102
31,531,278
569,687
32,526,010
32,100,965
2021
£’000
5,064
133
234
771
(43)
109
1,008
7,276
15.9p
22.8p
15.6p
22.4p
24,028
69.5p
75.4p
68.1p
73.9p
31,303
85.4p
98.3p
83.6p
96.2p
2020
£’000
(96)
103
294
244
–
8
2,004
2,557
(0.3)p
8.1p
(0.3)p
8.0p
2,642
4.7p
8.4p
4.6p
8.2p
5,199
4.4p
16.5p
4.3p
16.2p
The Directors believe that the above adjusted earnings per share calculation for continuing operations is a more appropriate
reflection of the Group’s underlying performance.
There are Nil share options at 31 May 2021 (2020: 585,000) that are not included within diluted earnings per share because they
are anti-dilutive.
71
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
12
Goodwill
Cost
At 1 June 2019
Acquisition of subsidiary undertaking
Exchange adjustments
At 1 June 2020
Acquisition of subsidiary undertaking (note 35)
Disposal of subsidiary undertaking (note 35)
Exchange movement
At 31 May 2021
Accumulated impairment losses
At 1 June 2019
Impairment charge
At 1 June 2020
Impairment charge
At 31 May 2021
Net book value
At 31 May 2021
At 31 May 2020
£’000
24,219
238
7
24,464
324
(2,521)
(40)
22,227
850
155
1,005
–
1,005
21,222
23,459
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to
benefit from that business combination. The carrying amount of goodwill has been allocated as follows:
Energy-EPM
Energy-PSRE
Medical-MII
2021
£’000
15,320
4,077
1,825
21,222
2020
£’000
15,352
6,598
1,509
23,459
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use
calculations are those regarding the revenue growth rates, expected changes to selling prices and direct costs during the period
and discount rates.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next
three years and derives cash flows for the following two years based on estimated growth rates for the specific markets in which
each CGU operates. The Group uses its past experience in compiling the cashflow forecasts. The estimated growth rate does not
exceed the average long-term growth rate for the relevant markets. A rate of between 0% and 3.4% has been used for Energy-
EPM, Energy-PSRE and Medical-MII CGUs respectively. Recent changes to management and improvements to the contract
negotiation and costing processes are expected to increase margins whilst Medical is developing into new markets and service.
Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
The rate used to discount the forecast cash flows for the EPM and PSRE divisions is 11.2% (2020: 10.5%), and for the MII
division is 13.7% (2020: 10.5%) which is considered appropriate based on the Group’s borrowings adjusted for the aggregate
risk in the respective markets.
Management have sensitised these key assumptions for each CGU within what is considered a reasonably possible range for
the market in which the Group operates. If we were to assume a 0% long term growth rate no impairment would arise (2020:
£798,000). If the discount rate was increased by 1% no impairment would arise (2020: £1,359,000).
Whilst a two year horizon is shorter than the expected remaining life of the relevant CGUs, the directors consider this a suitable
period to apply in performing impairment reviews due to the inherent uncertainty in further extrapolating three year forecasts.
72
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
13
Other intangible assets – group
Customer
Relationships Order book
£’000
£’000
Development
costs
£’000
Brand
£’000
Software
£’000
10,532
–
–
–
–
3,096
–
1,387
–
43
2,504
61
–
–
–
10,532
4,526
2,565
Cost
At 1 June 2019
Additions
Acquisition of subsidiary undertakings
Disposals
Exchange adjustments
At 1 June 2020
Additions
Acquisition of subsidiary
undertakings
Disposal of subsidiary
undertakings (note 35)
Disposals
Exchange adjustments
At 31 May 2021
Accumulated amortisation
At 1 June 2019
Charge for the year
Reclassification from PPE
Exchange differences
Disposals
At 1 June 2020
Charge for continuing
operations
Charge for discontinued
operations
Exchange adjustments
Disposal of subsidiary
undertakings
Disposals
At 31 May 2021
Net book value at 31 May 2021
Net book value at 31 May 2020
–
–
(1,491)
–
–
9,041
1,478
845
–
–
–
–
–
–
(4,526)
–
–
3,096
1,194
–
31
–
2,323
4,321
695
116
–
(526)
–
2,608
6,433
8,209
189
–
–
–
(4,510)
–
–
205
5,247
608
–
(625)
–
5,230
808
3,110
(156)
–
(101)
–
–
(596)
–
(8)
1,961
8,891
335
194
–
–
–
529
140
57
–
(221)
–
505
1,456
2,036
2,162
419
–
6
(595)
1,992
497
32
7
(32)
–
2,496
6,395
3,238
577
91
–
–
–
668
63
9
–
(18)
(2)
720
403
36
84
–
–
523
32
–
2
–
(16)
541
179
145
Total
£’000
21,956
760
1,387
(625)
43
23,521
871
3,119
(2,243)
(4,544)
(111)
20,613
7,474
2,688
84
37
(595)
9,687
1,553
205
9
(779)
(4,526)
6,149
14,464
13,834
73
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
14
Property, plant and equipment – group
Land
Plant and
and buildings Machinery
£’000
£’000
Equipment
and motor
vehicles
£’000
Cost
At 1 June 2019
Acquisitions
Additions
Disposals
Transfer
Exchange adjustments
At 1 June 2020
Acquisitions
Additions
Impairment
Disposals
Disposal of subsidiary company
Exchange adjustments
At 31 May 2021
Accumulated depreciation
At 1 June 2019
Charge in the year
Disposals
Reclassification to intangibles
Exchange adjustments
At 1 June 2020
Charge for continuing operations
Charge for discontinued operations
Disposals
Disposal of subsidiary
Transfer
Exchange adjustments
At 31 May 2021
23,641
4
1,604
(106)
–
18
25,161
–
829
(222)
(3)
(5,540)
(329)
19,896
1,889
1,770
(59)
–
17
3,617
1,350
348
(3)
(1,057)
61
(117)
4,199
15,270
107
1,878
(116)
161
66
17,366
306
807
–
(248)
(3,296)
(493)
14,442
4,325
1,962
(106)
49
15
6,245
1,553
299
(87)
(1,290)
–
(254)
6,466
3,330
11
502
(312)
(161)
27
3,397
–
677
–
(14)
(391)
(204)
3,465
1,405
610
(279)
(133)
13
1,616
558
59
(12)
(270)
–
(96)
1,855
Total
£’000
42,241
122
3,984
(534)
–
111
45,924
306
2,313
(222)
(265)
(9,227)
(1,026)
37,802
7,619
4,343
(444)
(84)
45
11,479
3,461
706
(102)
(2,617)
61
(467)
12,521
Net book value at 31 May 2021
15,697
7,976
1,610
25,281
Net book value at 31 May 2020
21,544
11,121
1,781
34,445
Right-of-use assets
Included in property, plant and equipment are right-of-use assets as follows:
Land and buildings
Plant and machinery
Equipment and motor vehicles
74
Carrying
amount
£’000
Additions
£’000
Depreciation
expense
£’000
2,817
1,468
199
4,484
721
–
54
775
870
324
91
1,285
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
15
Investments
Cost
At 1 June 2019
Acquisition of subsidiary undertakings
At 1 June 2020
Investment in subsidiary undertaking
Disposal of subsidiary undertaking (note 35)
Investment written off
At 31 May 2021
Provision
At 1 June 2019
Provision against subsidiary undertaking
At 1 June 2020
Investment written off
At 31 May 2021
Net book value at 31 May 2021
Net book value at 31 May 2020
Group
undertakings
£’000
Capital
contributions
£’000
40,284
1,650
41,934
4,154
–
(1,679)
44,409
4,424
1,805
6,229
(1,679)
4,550
39,859
35,705
169
65
234
75
(17)
–
292
–
–
–
–
–
292
234
Total
£’000
40,453
1,715
42,168
4,229
(17)
(1,679)
44,701
4,424
1,805
6,229
(1,679)
4,550
40,151
35,939
Investment written off in the table above relates to Crown UK Limited in which a provision was previously held so no profit/(loss)
impact.
The Company has the following investments in Ordinary shares in subsidiaries:
Name
Crown UK Limited
Stainless Metalcraft (Chatteris) Limited
Metalcraft (Chengdu) Limited *
Metalcraft (Sichuan) Limited *
Maloney Metalcraft Limited
Composite Products Limited
Space Cryomagnetics Limited **
Scientific Magnetics Limited **
Hayward Tyler Limited *
Hayward Tyler Inc *
Energy Steel & Supply Co. *
Hayward Tyler Pumps (Kunshan) Co Limited *
Hayward Tyler India PTE Limited *
Hayward Tyler Fluid Handling Limited *
Tecmag Inc **
Magnetica Limited ACN **
Hayward Tyler Group plc
Southbank UK Limited *
Hayward Tyler Group Limited *
Hayward Tyler Holdings Limited *
Hayward Tyler Holding Inc *
Nviro Cleantech Limited *
Redglade Associates Limited *
Redglade Investments Limited *
Country of incorporation
England and Wales
England and Wales
China
China
England and Wales
England and Wales
England and Wales
England and Wales
England & Wales
USA
USA
China
India
England & Wales
USA
Australia
Isle of Man
England & Wales
England & Wales
England & Wales
USA
England & Wales
England & Wales
England & Wales
Principal activity
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Holding company
Property
Holding company
Holding company
Holding company
Holding company
Property
Holding company
75
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
15
Investments (continued)
Name
Hayward Tyler Pension Plan Trustees Limited*
Hayward Tyler (UK) Limited *
Appleton & Howard Limited *
Credit Montague Limited *
Mullins Limited *
Country of incorporation
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Principal activity
Manages pension scheme
Dormant
Dormant
Dormant
Dormant
* Indirectly owned subsidiary.
** All subsidiaries are 100% owned with the exception of Magnetica (58.1% owned) and its 100% owned subsidiaries Space
Cryomagnetics Limited, Scientific Magnetics Limited and Tecmag Inc.
16
Inventories
Group
Raw materials and consumables
Work in progress
Finished goods
2021
£’000
4,872
2,345
2,859
2020
£’000
7,276
2,730
3,384
10,076
13,390
The replacement cost of the above stocks would not be significantly different from the values stated. During the year there was
an impairment charge included in cost of sales of £425,000 (2020: £46,000). The stock provision included within raw materials
is £2,630,000 (2020: £2,191,000).
17
Trade and other receivables
Group Company
Amounts falling due within one year
Trade receivables
Allowance for doubtful debts
Other receivables
Amounts owed by group undertakings
Prepayments
Contract assets
Amounts falling due after one year
Contract assets
2021
£’000
14,509
(175)
14,334
597
–
2,412
18,667
36,010
2020
£’000
16,388
(219)
16,169
362
–
4,813
15,566
36,910
2021
£’000
2020
£’000
– –
– –
– –
4,246
8,453
46
– –
4,235
27,559
10
12,745
31,804
1,798
–
– –
The group adopts a simplified approach in accounting for trade and other receivables and records the loss allowance as lifetime
expected credit losses. These are the expected shortfall in contractual cash flows, considering the potential for default at any
point during the life of the financial instrument. The group uses its historical experience, external indicators and forward-looking
information to calculate the expected credit losses using a provision matrix.
The Group’s maximum exposure to credit risk is limited to trade receivables net of allowance for doubtful debts.
An explanation of credit risk relating to trade receivables is provided on note 24 financial instruments.
The Contract Assets relates to a contract with contracted life of greater than one year and has been allocated based on expected
schedules.
76
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
18
Cash and cash equivalents
Cash and cash equivalents included the following components:
Group
Company
Cash at bank and in hand:
GBP
USD
EUR
Other
Total cash at bank and in hand
Overdraft:
Total cash and cash equivalents
31 May
2021
£’000
27,447
1,316
74
1,241
30,078
(342)
29,736
31 May
2020
£’000
3,053
474
471
1,090
5,088
(395)
4,693
31 May
2021
£’000
24,557
– –
– –
– –
24,557
– –
24,557
19
Provisions
The carrying amounts and the movements in the provision account are as follows:
Carrying amount
1 June 2019
Acquisition of subsidiary undertakings
Additional provisions
Amounts utilised
Reversals
Exchange adjustments
1 June 2020
Disposal of subsidiary undertakings
Additional provisions
Amounts utilised
Reversals
Exchange adjustments
31 May 2021
Warranty
£’000
Loss making
contracts
£’000
Group
Other Dilapidations
£’000
£’000
1,519
236
699
(444)
(537)
16
1,489
(286)
1,145
(397)
(370)
(86)
1,495
1,325
793
341
(970)
–
13
1,502
–
582
(327)
(1,554)
(41)
162
127
–
57
(186)
–
2
–
–
–
–
–
–
–
2,369
–
154
–
–
–
2,523
(2,266)
–
–
(168)
(4)
85
31 May
2020
£’000
1,658
1,658
1,658
Total
£’000
5,340
1,029
1,251
(1,600)
(537)
31
5,514
(2,552)
1,727
(724)
(2,092)
(131)
1,742
Warranty provision: Provisions for warranty work represent the estimated cost of work provided under the terms of the contracts
with customers with reference to the length and unexpired portion of the terms provided. Warranty periods vary by product and
typically have a range of 12 to 24 months.
Loss making contracts: Provisions for loss making contracts are the estimated total costs that exceed the total revenues from
contracts that are in progress at the reporting date. These contracts are expected to complete in the next 12 months and the losses
utilised.
Other provisions: The balance to carry forward in other provisions relates to liquidated damages. Provisions for liquidated damages
are the liabilities estimated to arise on the expected delay in shipment of contracts that have been shipped prior to 31 May 2021.
There were minor expected delays in the year.
Dilapidations: Provision for dilapidation mainly represents the estimated cost to restore the property to the agreed condition set out
in the lease rental agreement.
77
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
20
Trade and other payables
Trade payables
Other tax and social security
Other payables
Contract liabilities
Accruals
Group Company
2021
£’000
8,926
1,371
2,419
4,468
9,403
26,587
2020
£’000
12,483
1,553
1,714
5,243
9,315
30,308
2021
£’000
2020
£’000
92
31
110
– –
342
575
303
26
119
29
477
The other payables balance includes deferred grant income arising from the US Paycheck Protection Program of £1,248,000 (2020:
£749,000). This balance is expected to be recognised in the Income Statement in the next reporting period.
21
Other creditors
Non-current
Other creditors
Group Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
1,246
1,247
–
–
Other creditors relates to deferred grant income received from the Regional Growth Fund for capital investment. This balance is
expected to be recognised in the income statement over the life of the assets which the grant relates to. The majority of the grant
relates to building improvements which have 20 years of remaining depreciation.
22
Financial assets and liabilities
The carrying amounts of financial assets and financial liabilities in each category are as follows:
Group Company
2021
£’000
2020
£’000
2021
£’000
Financial assets at amortised cost:
Trade and other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities at amortised cost:
Trade payables
Accruals
Borrowings
Lease obligations
Financial liabilities measured at FVTPL:
Derivative financial instruments
Contingent/deferred consideration
14,334
30,078
44,412
8,926
9,403
5,528
4,275
28,132
144
–
16,169
5,088
21,257
12,483
9,315
9,970
11,465
43,233
36
256
Total financial liabilities
28,276
43,525
A description of the Group’s financial instrument risks is included in note 24.
78
8,453
24,557
33,010
92
342
431
– –
865
– –
–
865
2020
£’000
27,559
1,658
29,217
303
29
551
883
256
1,139
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
22
Financial assets and liabilities (Continued)
All of the Group’s derivative financial instruments in the current and prior year relate to USD forward contracts. All derivative
financial instruments in the current and prior period have a maturity within 12 months of their respective balance sheet date.
Borrowings comprise of:
Secured borrowings
Bank overdrafts and short-term borrowings
Bank loans
Total borrowings
Amount due for settlement within 12 months
Amount due for settlement after 12 months
Bank loans due within one to two years
Bank loans due within two to five years
Bank loans due after five years
Group Company
2021
£’000
2020
£’000
2021
£’000
1,326
4,202
5,528
2,160
3,368
2020
£’000
1,367
8,603
9,970
6,005
3,965
– –
430
430
181
249
Group Company
2021
£’000
2,674
363
331
3,368
2020
£’000
686
2,902
377
3,965
2021
£’000
181
68
– –
249
551
551
181
370
2020
£’000
181
189
370
Bank loans, overdrafts and short-term borrowings of £5,528,000 (2020: £9,970,000) are secured on certain assets of the Group. The
debt is secured over PPE, inventory and trade receivables. Their carrying values can be seen in notes 14,16 and 17 respectively.
At 31 May 2021 the Group had £33,891,000 (2020: £11,094,000) of undrawn committed borrowing facilities expiring within one
year which the Directors expect to be renewed. All borrowings were at variable rates relative to local base rates.
Short term borrowings and Bank loans were based on variable LIBOR rates at margins of between 2.75% - 3.0% and 1.5% - 2.5%
respectively.
The Group have £11,250,000 (2020: £11,750,000) of bond and guarantee facilities to support ongoing contract trading activity. As
at the 31 May, £5,888,000 is utilised (2020: £8,862,000).
23
Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-current
At 31 May
2021
£’000
At 31 May
2020
£’000
1,310
2,965
4,275
2,125
9,340
11,465
With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a
right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments
based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies
its right-of-use assets in a consistent manner to its property, plant and equipment (see note 14).
79
Notes to the Annual Report (Continued)
For the year ended 31 May 2020
23
Lease liabilities (continued)
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party,
the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a
substantive termination fee. Some leases contain an option to purchase the underlying leased asset outright at the end of the lease,
or to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security.
For leases over office buildings and factory premises the Group must keep those properties in a good state of repair and return the
properties in their original condition at the end of the lease.
The lease liabilities are secured by the related underlying assets. Future minimum lease payments were as follows:
Within
1 year
£’000
1,459
(149)
1,310
2,654
(529)
2,125
1-2 years
£’000
2-3 years
£’000
3-4 years
£’000
4-5 years
£’000
1,212
(102)
1,110
2,164
(447)
1,717
732
(60)
672
1,970
(375)
1,595
605
(36)
569
1,347
(317)
1,030
541
(13)
528
1,219
(277)
942
Over
5 years
£’000
87
(1)
86
Total
£’000
4,636
(361)
4,275
5,029
(973)
4,056
14,383
(2,918)
11,465
31 May 2021
Lease payments
Finance charges
Net present value
31 May 2020
Lease payments
Finance charges
Net present value
The group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or
for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable
lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred.
The expense relating to payments not included in the measurement of the lease liability is as follows:
Short-term leases
Leases of low value assets
2021
£’000
189
89
278
2020
£’000
494
29
523
Some leases contain break clauses or extension options to provide operational flexibility. Potential future undiscounted lease
payments not included in the reasonably certain lease term, and hence not included in lease liabilities, total £2.3m at 31 May 2021
(31 May 2020: £2.3m).
Future increases or decreases in rentals linked to an index or rate are not included in the lease liability until the change in cash flows
takes effect. 3% (2020: 5%) of the Group’s lease liabilities are subject to inflation-linked rentals and a further 8% (2020: 45%) are
subject to rent reviews. Rental changes linked to inflation or rent reviews typically occur on an annual or five-yearly basis.
The Group has not signed any leases in the year which have not yet commenced.
80
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
24
Financial instruments
The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by category
are summarised in Note 22. The main types of risks are capital risk, market risk, foreign currency risk, interest risk, price risk, credit
risk, and liquidity risk.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the
return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt,
which includes the borrowings disclosed in notes 22 and 23 cash and cash equivalents and equity attributable to equity holders of
the parent, comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity.
The Board closely monitor current and forecast cash balances at monthly Board meetings to allow the Group to maximise return
to shareholders by way of dividends, whilst maintaining suitable amounts of liquid funds and facilities to allow acquisitions to be
funded as opportunities arise and continued investment in property, plant and equipment and research and development. The level
of dividends are set by the Board to meet the expectations of the shareholders based on cash generated by the Group.
The gearing ratio at the year-end is as follows:
Debt
Cash and cash equivalents
Net (debt)/cash
Equity
Net (debt)/cash to equity ratio
Group Company
2021
£’000
(9,803)
30,078
20,275
98,963
20.5%
2020
£’000
(21,435)
5,088
(16,347)
69,908
(23.4)%
2021
£’000
(431)
24,557
24,126
76,448
31.6%
2020
£’000
(551)
1,658
1,107
68,117
1.6%
Debt is defined as short and long term borrowings and lease liabilities, as detailed in note 22. Equity includes all capital and reserves
of the Group attributable to equity holders of the parent. The Group is not subject to externally imposed capital requirements.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in interest rates and foreign currency exchange rates
particularly in US dollars and the Euro.
Foreign currency risk management
The exposure to foreign currency risk expressed in GBP was as follows:
Trade and other receivables
Overdrafts
Bank loans
Lease liabilities
Trade and other creditors
USD
£’000
9,034
(342)
(1,132)
(2,840)
(10,890)
31 May 2021
EUR
£’000
RMB
£’000
USD
£’000
31 May 2020
EUR
£’000
RMB
£’000
325
–
–
–
(86)
5,301
–
–
(400)
(1,021)
5,829
(395)
(1,187)
(3,236)
(11,058)
751
–
–
–
(1,005)
3,936
–
–
(592)
(639)
The Group enters into forward foreign currency contracts to eliminate exposures on certain material sales or purchases denominated
in foreign currency once a significant commitment has been made.
Derivative contracts are measured at fair value in the statement of financial position with movements in that fair value being
recognised in profit or loss. The Group presently has foreign exchange forward contracts to purchase £2.0 million (2020: £0.6
million) in order to manage the transactional currency exposure on certain contracts outstanding as at 31 May 2021.
The foreign exchange loss in the year shown in the Statement of Comprehensive Income is mainly due to the weakening of the US
Dollar from the prior year.
81
Notes to the Annual Report (Continued)
For the year ended 31 May 2020
24
Financial instruments (continued)
The following table details the Group’s sensitivity to a 10% increase and decrease in Sterling against the relevant foreign currencies
on overseas assets. These changes are considered to be reasonably possible based on observation of current market conditions.
Euro currency impact
2020
£’000
2021
£’000
US $ currency impact
2020
£’000
2021
£’000
RmB currency impact
2020
£’000
2021
£’000
(26)
28
206
581
(475)
(366)
Impact (+/-) on
Profit for the financial year/equity
Interest rate risk management
The Group finances its operations where necessary through bank loans, overdrafts and finance lease facilities. The bank loans and
overdrafts are at floating rates principally at negotiated margins using pooling of the Group’s requirements to achieve this. The
finance lease facilities are held at both fixed and floating rates.
If interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank overdrafts attracting interest at floating rates)
were to change by + or – 0.5% the impact on the results in the income statement and equity would be an increase/decrease of
£42,000. These charges are considered to be reasonably possible based on observation of current market conditions.
Price risk management
Where possible the Group enters into long term contracts with suppliers to mitigate any significant exposure to materials and utilities
price risk.
Credit risk management
The Group’s principal financial assets are bank balances, cash, and trade receivables. The credit risk is managed on a group basis
based on the Group’s credit risk management policies and procedures.
The Group’s principal credit risk is attributable to its trade receivables. Credit risk is managed by monitoring the aggregate amount
and duration of exposure to any one customer depending upon their credit rating. The amounts presented in the balance sheet are
net of allowances for doubtful debts, estimated by the Group’s management based on prior experience and their assessment of the
current economic environment.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international
credit-rating agencies.
The Group has no major customer representing more than 10% (2020: no major customer which representing more than 10%) of
trade receivables, the Group has no other significant concentration of receivables.
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items
do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed on
a collective basis as they possess shared credit risk characteristics, for example, the Group have a significant number of government
contracts which we consider to be lower credit risk than corporate entities.
The expected loss rates are based on a review of historical customer payment profiles as well as the corresponding historical credit
losses during that period. The historical rates are adjusted to reflect current and forwarding looking macroeconomic factors affecting
the customer’s ability to settle the amount outstanding.
Trade receivables are written off (ie derecognised) when there is no reasonable expectation of recovery. Usually this occurs when
the customer goes into administration or ceases trading.
82
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
24
Financial instruments (continued)
Ageing of trade receivables and expected credit loss provision:
31 May 2021
Trade receivables, gross
Expected credit loss provision
31 May 2020
Trade receivables, gross
Expected credit loss provision
0-30
£’000
8,531
(44)
8,487
10,236
(21)
10,215
Trade receivables aged from invoice date
31-60
£’000
3,211
(19)
3,192
3,098
(5)
3,093
61-120
£’000
121-360
£’000
>360
£’000
1,592
(10)
1,582
1,500
(11)
1,489
863
(42)
821
1,039
(91)
948
312
(60)
252
515
(91)
424
Total
£’000
14,509
(175)
14,334
16,388
(219)
16,169
The Directors consider that the carrying amount of trade and other receivables approximates to fair value.
The average credit period taken on sales of goods is 43 days (2020: 31 days) in respect of the Group. No interest is generally charged
on the receivables until legal action is taken. Thereafter, interest is charged at 8% above bank base rate on the outstanding balance.
The Company has £4.2m receivable from JTC Employer Solutions Trustee Limited (note 34) this is supported by the JTC’s
shareholding as disclosed on page 22. The Company regularly reviews this in comparison with the current share price for any credit
risk. The amounts owed by group undertakings (note 17) is reviewed regularly against financial forecasts for any credit risk.
Liquidity risk management
The Group funds acquisitions through a mixture of cash, equity and long-term debt. Short term financing needs are met by working
capital facilities.
The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long term financial liabilities
as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and
week-to-week basis, as well as on the basis of a monthly 13 week projection. Long-term liquidity needs for up to a two-year
period are projected monthly and reviewed quarterly. The Group maintains cash and working capital facilities to meet its liquidity
requirements for up to 30-day periods. Funding in regards to long-term liquidity needs is additionally secured by an adequate
amount of committed credit facilities.
Details about the maturity of financial liabilities can be found in note 22 Financial assets and liabilities and note 23 Lease liabilities.
All facilities are secured on the assets of the Group.
83
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
25
Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current
and prior reporting period.
Accelerated
tax
depreciation
£’000
Intangibles
£’000
Other
temporary
differences
£’000
Tax losses
£’000
Total
£’000
At 1 June 2019
Arising on fair value adjustments on business
combinations
On acquisition of Energy Steel
Reclassification
Credit to income – continuing operations
Credit to income – discontinued operations
Charge/credit to other comprehensive income
At 1 June 2020
Arising on fair value adjustments on business
combinations
Credit to income – continuing operations
Credit to income – discontinued operations
Charge/credit to other comprehensive income
Disposals – discontinued operations
At 31 May 2021
(332)
1,920
485
(1,423)
–
–
810
24
19
–
521
–
(195)
88
–
287
701
386
–
–
(328)
5
–
1,983
836
167
(30)
–
(258)
2,698
–
(16)
(810)
254
–
43
(44)
–
150
24
(49)
(24)
57
650
386
(16)
–
128
28
43
–
–
–
178
4
–
(1,241)
1,219
–
(526)
(353)
–
353
836
(404)
(271)
(49)
358
(1,767)
1,689
Certain deferred tax assets and liabilities have been offset where the relevant criteria are met. The following is the analysis of the
deferred tax balances (after offset) for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
2021
£’000
1,767
(3,456)
(1,689)
2020
£’000
1,241
(2,460)
(1,219)
At the balance sheet date the Group has unused tax losses of £22.6 million (2020: £32.6 million) available for offset against future
profits. A deferred tax asset has been recognised in respect of £6.1 million (2020: £6.5 million) of such losses.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available in future against which
deductible temporary differences can be utilised. This is assessed based on the Group’s forecast of future operating results and the
future projected profitability of entities within the Group. In addition the Group has an unrecognised deferred tax asset of £56k
(2020: £30k) in respect of share based payments.
At the balance sheet date the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for
which deferred tax liabilities have not been recognised was £nil (2020: £nil). No liability has been recognised in respect of these
differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that
such differences will not reverse in the foreseeable future.
84
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
26
Called up share capital
2021 2020
Allotted, issued and fully paid
Ordinary shares of 5p each
No.
£’000
No.
31,971,307
1,599
31,752,861
Reconciliation of movement in allotted, issued and fully paid share capital
At 1 June 2019 and 31 May 2020
Shares issued in period to Acquisition
Shares issued on exercise of share options (note 27)
At 31 May 2021
No.
31,752,861
40,713
177,733
31,971,307
£’000
1,588
£’000
1,588
2
9
1,599
The Company has a share option scheme under which options to subscribe for the Company’s shares have been awarded to certain
directors and employees. During the year 686,733 options were exercised, 39,733, 179,000, 74,000, 333,000, 55,500, and 8,500 at
39.5p, 176.0p, 177.5p, 181.5p, 193.0p and 218.5p respectively. The market price on the day of exercise was between 244.0p and
370.0p. Further details of the scheme are given in note 27.
Shares issued in period to acquisition relate to the reorganisation of SciMag prior to the acquisition with Magnetica in which the
intercompany loan was cancelled in exchange for shares.
The market price of the Company’s shares at the end of the year was 335.0p (2020: 233.0p). The highest and lowest market prices
during the year were 211.0p and 370.0p (2020: 330.0p and 185.0p respectively).
27
Share-based payments
The Group has recognised a portion of the fair value of these options in calculating the profit for the current and prior year.
Outstanding at the start of the year
Lapsed during the year
Issued during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2021
2020
Weighted
Average
Exercise
price p
207.36
254.53
288.00
172.81
234.51
191.86
Options
(No. ‘000)
2,577.7
126.5
585.0
317.5
2,718.7
1,284.7
Weighted
Average
Exercise
price p
183.99
198.23
267.00
131.18
207.36
185.32
Options
(No. ‘000)
2,718.7
17.5
594.5
686.7
2,609.0
1,040.5
The options outstanding at 31 May 2021 had exercise prices in the range 109.0p to 288.0p and a weighted average remaining
contractual life of 7.4 years (2020: 7.3 years). The average market share price of options at date of exercise was 330.36p (2020:
267.74p).
Of the 686,600 options exercised in the period 177,773 resulted in the issue of new shares, the balance relates to options under the
Exsop scheme which are issued on inception (see Note 34).
85
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
27
Share-based payments (Continued)
The terms of these options are as follows:
Date of grant
Options
outstanding at
31 May 2021
22/11/2013
3,000
Vesting
period
3 years
9/12/2014
8,000
3 years
21/12/2016
999,500
3 years
15/12/2017
30,000
3 years
15/11/2018
117,000
3 years
15/11/2018
285,000
3 years
17/12/2019
572,000
3 years
24/11/2020
594,500
3 years
Market value at
date of grant
(p)
Exercise
price (p)
Exercise period
176.00
109.00
193.00
177.50
218.50
220.00
267.00
288.00
176.00
109.00
193.00
177.50
218.50
220.00
267.00
288.00
23/12/2016 to
22/12/2023
10/12/2017 to
9/12/2024
22/12/2019 to
21/12/2026
16/12/2020 to
15/12/2027
16/11/2021 to
15/11/2028
16/11/2021 to
15/11/2028
17/12/2022 to
16/12/2029
24/11/2023 to
20/11/2030
The performance condition for each of these options is that the increase in adjusted EPS must be at least equal to the increase in RPI
over the vesting period.
All share options are equity settled. The adjusted EPS is the basic earnings per share published in the Preliminary Announcement
of Results with adjustments made for amortisation of acquisition related intangibles costs of share based payments, and exceptional
items agreed by the Remuneration Committee. Further adjustments to the above performance conditions may be approved by the
Remuneration Committee to reflect future changes in accounting standards.
The fair value of the options was calculated by external consultants, Pegg, Franklin & Co and Pinsent Masons.
Options granted with performance conditions are valued using the Black-Scholes model.
For all awards, recipients are required to remain in employment with the Group over the vesting period.
Future volatility at the date of grant has been estimated by reference to the historical volatility at that time.
The expected life used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Total charge to the income statement in respect of share-based payments
In respect of:
Equity settled share options
2021
£’000
133
2020
£’000
112
There are no share-based payment transactions that were expensed immediately. A deferred tax credit of £nil (2020: £nil) was
recognised during the year in respect of share-based payments.
86
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
28
Pensions and other employee obligations
Within the UK the Group operates a defined benefit plan with benefits linked to final salary and a defined contribution plan.
The defined benefit pension arrangement, called the Hayward Tyler Pension Plan (the “Plan”), and provides benefits based on
final salary and length of service on retirement, leaving service or death. With effect from 1 June 2003 the Plan was closed to new
UK employees and to future service accrued for existing members who are offered membership of the defined contribution plan.
The majority of UK employees are members of one of these arrangements. The method used in assessing the Plan liabilities is the
projected unit method.
The Plan is subject to the Statutory Funding Objective under the Pensions Act 2004. A valuation of the Plan is carried out at least
once every three years to determine whether the Statutory Funding Objective is being met. As part of the process the Company must
agree with the trustees of the Plan the contributions to be paid to meet the Statutory Funding Objective.
The most recent comprehensive actuarial valuation of the Plan was carried out as at 1 January 2020 and the next valuation of the
Plan is due as at 1 January 2023. In the event that the valuation reveals a larger deficit than expected the Company may be required
to increase contributions above those set out in the existing Schedule of Contributions. Conversely, if the position is better than
expected, it’s possible that contributions may be reduced.
The Company expects to pay contributions of £282,000 in the year to 31 May 2022 based on the current Schedule of Contributions
dated 30 March 2021.
The Plan is managed by a board of trustees appointed in part by the Company and in part from elections by members of the Plan.
The board of trustees includes a professional trustee (Independent Trustee Services Limited). The trustees have responsibility for
obtaining valuations of the fund, administering benefit payments and investing the Plan’s assets. The trustees delegate some of these
functions to their professional advisers where appropriate.
The Plan exposes the Company to a number of risks:
•
•
Investment risk
The Plan holds investments in asset classes, such as equities, which have volatile market values and, while these assets are
expected to provide real returns over the long-term, the short-term volatility can cause additional funding to be required if a
deficit emerges;
Interest rate risk
The Plan’s liabilities are assessed using market yields on high quality corporate bonds to discount the liabilities. As the Plan
holds assets such as equities the value of the assets and liabilities may not move in the same way;
Inflation risk
•
A significant proportion of the benefits under the Plan are linked to inflation. Although the Plan’s assets are expected to provide
a good hedge against inflation over the long-term, movements over the short-term could lead to deficits emerging;
• Member options
Certain benefit options may be exercised by members without requiring the consent of the Trustees or the Company, for example
exchanging pension for cash at retirement. In this example, if fewer members than expected exchange pension for cash at
retirement then a funding strain will emerge;
• Mortality risk
In the event that members live longer than assumed a deficit will emerge in the Plan; and
• Concentration risk
A significant proportion of the Plan’s liabilities are in respect of a single pensioner member. The development of the liabilities
over time will therefore depend heavily on the actual experience in respect of this member.
There were no plan amendments, curtailments or settlements during the year (2020: nil).
Risk mitigation strategies
The trustees invest the Plan’s assets in combination of Liability-Sensitive assets and Return-Generating assets. The Liability-
Sensitive assets are invested in a variety of LDI (Liability-Driven Investment) Funds. These funds invest in a combination of interest
rate and inflation rate swaps in order to mimic the movement in expected cash flows of the Plan caused by changes in interest and
inflation rates.
Profile of defined benefit obligation
The weighted average duration of the defined benefit obligation is 13 years.
87
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
28
Pensions and other employee obligations (continued)
The Group’s defined benefit obligations and plan assets may be reconciled to the amounts presented on the face of the statement of
financial position for each of the reporting periods under review as follows:
Defined benefit obligation
Fair value of plan assets
Net defined benefit asset
Amounts recognised in the income statement during the year are shown in the table below.
Interest on liabilities
Interest on assets
Total credit to income statement
Scheme liabilities
The defined benefit obligations for the reporting years under review are as follows:
Defined benefit obligation at start of year
Interest cost
Changes to demographic assumptions
Changes to financial assumptions
Experience/(gain)on liabilities
Benefits paid
Defined benefits obligation at end of year
Discount rate
Expected rate of pension increases
Inflation assumption
Mortality assumption
Group
At 31 May
2021
£’000
At 31 May
2020
£’000
(13,116)
14,400
(13,531)
15,177
1,284
1,646
Group
At 31 May
2021
£’000
At 31 May
2020
£’000
197
(224)
(27)
282
(315)
(33)
Group
At 31 May
2021
£’000
At 31 May
2020
£’000
13,531
197
424
126
(402) –
(760)
12,930
282
(352)
1,429
(758)
13,116
13,531
Group
At 31 May
2021
£’000
At 31 May
2020
£’000
1.95%
3.10%
3.45%
1.50%
2.40%
3.05%
S3PFA CMI S2PXA CMI
S3PFA CMI – for males and females projected on a year of birth basis using CMI (2020) projections with a long-term rate of
improvement of 1.25% per annum. The mortality assumptions imply the following life expectancies:
• Life expectancy at age 65 of male aged 45
• Life expectancy at age 65 of male aged 65
• Life expectancy at age 65 of female aged 45
• Life expectancy at age 65 of female aged 65
21.0
19.7
25.1
23.6
88
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
28
Pensions and other employee obligations (continued)
These assumptions were developed by management under consideration of expert advice provided by Barnett Waddingham, independent
actuarial appraisers. These assumptions have led to the amounts determined as the Group’s defined benefit obligations for the reporting
years under review and should be regarded as management’s best estimate. However, the actual outcome may vary.
No assumption is made with regard to the expected rate of salary increases as there are no members with benefits related to future salary
progression.
The current asset spilt is as follows:
Multi-asset growth portfolio
Gilts and LDI
Cash
Total assets
The remeasurement recorded in other comprehensive income is as follows:
Loss/(gain) on scheme assets in excess of interest
Loss/(gain) from changes to demographic assumptions
Experience/(gains)on liabilities
Loss from changes to financial assumptions
Total loss/(gain) recognised in other comprehensive income
Sensitivity of the value placed on the liabilities
Reduce discount rate by 0.1% p.a.
Increase inflation and related assumption by 0.1% p.a.
Increase a long-term rate of longevity improvement by 0.25% p.a.
Apply a 90% loading to the mortality base table (reduces probability of death by 10% at each age)
Group
At 31 May
2021
£’000
At 31 May
2020
£’000
7,474
6,672
254
6,813
7,647
717
14,400
15,177
Group
At 31 May
2021
£’000
At 31 May
2020
£’000
514
424
(402) –
126
662
(1,135)
(352)
1,429
(58)
Approximate
effect on
liabilities
£170,000
£114,000
£101,000
£576,000
Note that the above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other
assumptions remain the same.
Effect of the Plan on Group’s future cash flows
The Group is required to agree a Schedule of Contributions with the Trustees of the Plan following a valuation which must be carried
out at least once every three years. The next valuation of the Plan is due by 1 April 2023. In the event that the valuation reveals a
larger deficit than expected the Company may be required to increase contributions above those set out in the existing schedule of
contributions. Conversely, if the position is better than expected contributions may be reduced.
89
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
29
Notes to the consolidated cash flow statement
Cash flows from operating activities:
Continuing operations
Profit/(loss) before income tax from continuing operations
(Loss)/profit before income tax from discontinuing operations before disposal
Adjustments for:
Depreciation
Amortisation of intangible assets
Amortisation of intangibles from business combinations
Loss on disposal of property, plant and equipment
Finance income
Finance expenses
Share based payment charge
Changes in working capital
Decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in provisions
Other non cash changes
Cash flows from operating activities
Cash and cash equivalents
Cash
Overdrafts
30
Notes to the company cash flow statement
Continuing operations
Loss before income tax from continuing operations
Adjustments for:
Finance income
Finance expenses
Share based payment charge
Investment provision
Changes in working capital
Increase in trade and other receivables
Decrease in trade and other payables
Other non-cash changes
Cash flow from operating activities
90
2021
£’000
5,447
(1,732)
3,461
545
1,008
6
(73)
711
133
1,468
(5,108)
1,457
(457)
11
6,877
2021
£’000
30,078
(342)
29,736
2021
£’000
(2,308)
(436)
8
58
–
(46)
(159)
1 2
2020
£’000
(69)
1,889
4,343
466
2,222
119
(38)
1,141
112
2,157
(5,010)
(3,565)
(824)
(24)
2,919
2020
£’000
5,088
(395)
4,693
2020
£’000
(535)
(674)
14
46
155
(776)
(1,715)
(2,882)
(3,483)
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
31
Reconciliation of liabilities arising from finance activities
Group
At 1 June 2019
Cash flows:
Repayments
New borrowings
Non-cash:
New leases
Acquisition of subsidiary undertakings
Amortisation of finance fees
Exchange adjustments
Reclassification
At 31 May 2020
At 1 June 2020
Cash flows:
Repayments
New borrowings
Non-cash:
New leases
Disposal of subsidiary undertakings
Amortisation of finance fees
Exchange adjustments
Reclassification
Long-term
borrowings
£’000
Short-term
borrowings
£’000
Lease
liabilities
£’000
Overdraft
£’000
Total
£’000
3,816
4,089
11,901
856
20,662
–
820
–
–
10
–
(681)
3,965
3,965
(675)
1,466
(2,200)
–
(679)
209
–
–
20
29
681
1,313
391
–
60
–
5,610
11,465
5,610
11,465
–
–
–
9
–
395
395
(3,554)
2,495
1,313
391
30
98
–
21,435
21,435
–
–
(4,397)
149
(1,993)
(2)
–
–
(6,392)
149
–
–
–
(1)
(596)
–
–
22
(162)
596
780
(5,536)
–
(441)
–
–
–
–
(51)
–
780
(5,536)
22
(655)
–
9,803
At 31 May 2021
3,368
1,818
4,275
342
Company
At 1 June 2019
Cash flows:
Repayments
Non-cash:
Amortisation of finance fees
Reclassification
At 1 June 2020
Cash flows:
Repayments
Non-cash:
Amortisation of finance fees
Reclassification
At 31 May 2021
32
Related party transactions
Long-term
borrowings
£’000
Short-term
borrowings
£’000
Lease
liabilities
£’000
Overdraft
£’000
Total
£’000
536
–
–
(166)
370
180
(167)
2
166
181
–
(120)
(1)
(120)
249
–
120
181
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
716
(167)
2
–
551
(120)
(1)
431
Company
The Directors benefited from dividends paid in the year (note 10) on their shareholdings as set out in the Directors report page 22.
91
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
32
Related party transactions (continued)
Transactions with Magnetica Ltd its subsidiaries following the acquisition 58.1% of Magnetica Ltd (29 January 2021) were as
follows:
Recharges to Magnetica and Subsidiaries
Balances outstanding as at 31 May
Inter-company balance owed by Magnetica and Subsidiaries
Inter-company balance owed to Magnetica and Subsidiaries
Group
2021
£’000
4
1
118
Company
2021
£’000
3
–
118
As part of the original Sale & Purchase Agreement, on 30 April 2021 4,651,861shares in Magnetica Ltd were issued to Avingtrans
plc for £388,341 resulting in Avingtrans holding increasing to 58.1%.
33
Financial commitments
Capital commitments
Commitments for capital expenditure were as follows:
Contracted for, but not provided in the accounts
34
Investment in own shares
2021
£’000
566
2020
£’000
–
On 22 June 2011 the Company approved, adopted and established the Avingtrans Employees’ Share Trust (‘the ExSOP Trust). A
summary of the Trust Deed is as follows:
It has been established that the original trustee is JTC Employer Solutions Trustee Limited
•
• The primary objective of the ExSOP Trust is to hold the capital and income of the Trust for the beneficiaries
• The beneficiaries and the Trustee jointly subscribe for an initial interest in the shares purchased by the Trust
•
If the performance condition as set out in note 27 is achieved the option can be exercised by the beneficiaries
During the year Nil (2020: 303,308) shares were purchased at a cost of £Nil (2020: £809,832) by the Trust and beneficiaries, an
interest in which was allocated to the Executive Directors as beneficiaries (NIL FY21 note 27). All shares held by the trust are under
option to Directors. Costs are charged to profit and loss as incurred. The above holdings are held at a cost of £4,235,000 (2020:
£4,235,000) and shown as a deduction from equity in the statement of changes in shareholders’ equity.
92
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
35
Acquisitions and disposals
Business combination – Magnetica Limited
On 29 January 2021, the Group acquired 58.1% of the shares in Magnetica Ltd in exchange for its 98.5% shareholding in Scientific
Magnetics Limited plus deferred cash consideration. Prior to exchange Avingtrans capitalised its £4,097,000 loan to Scientific
Magnetics Limited for an increase in its shareholding to 98.5%. Post-acquisition Scientific Magnetics Limited will be a subsidiary
of the Magnetica Limited.
Magnetica Limited is an Australian medtech and engineering company which specialises in next-generation MRI technologies. By
bringing together Scientific Magnetics Limited and Magnetica Limited management can accelerate the development of compact
MRI systems.
Scientific Magnetics Limited owns 100% of the common stock of Tecmag Inc, a subsidiary based in Texas which specialises in
spectrometer design and manufacture.
The fair value of Magnetica’s net assets at the date of acquisition were as follows:
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Cash
Trade and other payables
Deferred tax liability
Net assets
Goodwill
Goodwill and consideration on acquisition:
Fair value of business given in consideration
Deferred consideration
Non-controlling interest in relation to Magnetica
Less fair value of assets and liabilities acquired
Goodwill
£’000
306
3,119
42
23
349
(197)
(858)
2,784
324
3,108
1,785
157
1,167
(2,784)
324
We have calculated the fair value of the business given in consideration using a discounted cash flow model. In exchange for the
58.1% shareholding in Magnetica the gave up 40.4% of our interest in Scientific Magnetics and its subsidiary, Tecmag. The 40.4%
is the difference between the original ownership in Scientific Magnetics (98.5%) and the acquired shareholding in Magnetica
(58.1%). To calculate the value Scientific Magnetics and Tecmag, have prepared detailed cash flow forecasts on a standalone basis
for a 2-year period beyond the acquisition date. Beyond the forecast period we have assumed a 3.4% revenue growth rate based on
historical trends. Cash flows have been discounted at a rate of 13.7%
As part of the sales agreement, Avingtrans were required to make an additional cash injection of £388,000. The deferred consideration
value is calculated by multiplying this cash injection by 40.4%. The deferred cash consideration was paid in the financial year.
Non-controlling interest has been calculated using the proportionate share of net assets approach.
93
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
35
Acquisitions and disposals (Continued)
The impact of the Magnetica acquisition on the Consolidated income statement is as follows:
Revenue
Cost of sales
Gross profit
Distribution costs
Operating profit before amortisation of acquired intangibles, other non-underlying items and other exceptional items
Acquisition related expenses
Loss before tax
Tax income
Overall effect on the Consolidated Income Statement
Since acquisition Magnetica contributed the following to the Group’s cashflows:
Net cash outflow from operating activities
Net cash used by investing activities
Net cash inflow from financing activities
Discontinued operations – Peter Brotherhood Limited
£’000
47
(22)
25
(209)
(184)
(234)
(418)
–
(418)
£’000
(398)
(173)
–
a) Description
On 11 March 2021, Hayward Tyler Group PLC, subsidiary of the Avingtrans Group disposed of Peter Brotherhood Limited
to Granite Holdings Global Limited. Peter Brotherhood Limited is reported as a discontinued operation. Financial information
relating to the discontinued operation for the period to the date of disposal is set out below. In the prior year, management
took the decision to close the Crown site near Bristol and relocate the residual road and rail infrastructure assets to Stainless
Metalcraft. The financial results for this year are included in the table below.
b) Financial performance and cash flow information
Revenue
Expenses
(Loss)/profit before income tax
Income tax credit/(expense)
(Loss)/profit after income tax of discontinued operations
Gain on sale of the subsidiary after income tax
Profit from discontinued operations
Net cash flow from operations
Net cash flow from investing activities
Net cash flow from financing activities
Net increase/(decrease) in cash generated
94
2021
£’000
8,354
(10,086)
(1,732)
489
(1,243)
23,379 –
22,136
2021
£’000
(2,314)
26,618
(383)
23,921
2020
£’000
22,697
(20,808)
1,889
(406)
1,483
1,483
2020
£’000
2,624
(595)
(4,472)
(2,443)
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
35
Acquisitions and disposals (Continued)
c) Details of the sale of the subsidiary
Cash consideration
Adjustment for cash on disposal
Disposal expenses
Net cash impact from disposal
d) Profit on the sale of the subsidiary
Net cash impact from disposal
Adjustment for cash on disposal
Net assets
Profit on disposal of subsidiary
The carrying amount of assets and liabilities at the date of sale were:
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Trade and other payables
Deferred tax liability
Lease liabilities
Provisions
Total liabilities
Net assets
2021
£’000
30,636
(1,573)
(2,428)
26,635
2021
£’000
26,636
1,573
(4,830)
23,379
2021
£’000
2,521
1,464
6,610
617
1,285
3,026
248
1,573
17,344
(4,169)
(257)
(5,536)
(2,552)
(12,514)
4,830
e) Reconciliation of enterprise value to equity value (cash consideration)
The disposal was made using a locked box mechanism which fixes the price payable on completion by reference to the net debt and
working capital on an agreed point in time (the “locked box date”).
Enterprise value
Normalised working capital
Cash
Lease liabilities
Deferred capital expenditure
Other items
Equity value / cash consideration
£’000
35,000
(1,043)
1,877
(5,649)
(446)
897
30,636
95
Notes to the Annual Report (Continued)
For the year ended 31 May 2021
36
Non-controlling interest (NCI)
During the year the Group acquired 58.1% of the issued shares of Magnetica Limited in exchange for the Group’s shareholding in
Scientific Magnetics Limited and its subsidiary, Tecmag Inc. The Group had no non-controlling interests in the prior year.
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the
group. The amounts disclosed are before intercompany eliminations.
Summarised statement of financial position:
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated NCI
Summarised statement of comprehensive income:
Revenue
Profit for the period
Other comprehensive income
Total comprehensive income
Profits allocated to NCI
Dividends paid to NCI
Summarised cash flows:
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Net increase in cash and cash equivalents
31 May 21
£’000
1,697
(1,534)
163
4,751
(938)
3,813
3,976
1,665
2021
£’000
1,929
(607)
–
(607)
(166)
–
2021
£’000
(467)
(530)
418
(579)
At the time of acquisition, the Group signed a subscription agreement with Magnetica Limited which allowed them to draw-down
additional funding from Avingtrans plc in exchange for the issue of new shares. The subscription of shares is conditional upon
Magnetica and its subsidiaries spend against on the compact MRI project. The total amount they can draw down is AUD$3,692,000,
or £2,010,000 when translated at the year-end exchange rate.
96
Notice of Annual General Meeting
Notice is hereby given that the virtual Annual General Meeting of Avingtrans plc will be held at Shakespeare Martineau LLP,
No1 Colmore Square, Birmingham, B4 6AA on 18 November 2021 at 11:00am for the following purposes:
Shareholders are encouraged to vote electronically via www.signalshares.com, and to appoint the Chair of the Meeting as their
proxy with their voting instructions prior to the meeting. Votes received should be submitted to the Registrar before 11:00am on
the 16 November 2021.
To consider, and if thought fit, to pass the following resolutions numbered 1 to 5 as ordinary resolutions
1. 1. To receive and adopt the reports of the Directors and the auditor and the financial statements for the year ended 31 May
2021.
2. To declare a final dividend of 4.0p per ordinary share payable on 10 December 2021 payable to shareholders on the register
of members on 29 October 2021.
3. To re-elect Stephen King as a Director.
4. To re-elect Les Thomas as a Director.
5. To reappoint Grant Thornton UK LLP as auditor of the Company to hold office until the conclusion of the next general
meeting at which accounts are laid before the Company and that their remuneration to be fixed by the Directors.
To transact any other ordinary business of an Annual General Meeting and as special business to consider the following
Resolutions, Resolution 6 being proposed as Ordinary Resolutions and Resolution 7 as a Special Resolutions.
6. That the Directors be generally and unconditionally authorised to exercise all the powers of the Company to allot relevant
securities as defined in Section 551 of the Companies Act 2006 (the “Act”) up to an aggregate nominal value of £528,368
provided that this authority shall expire in whichever is the earlier of the conclusion of the next Annual General Meeting
of the Company or the date falling 15 months from the date of the passing of this Resolution, except that the Company
may before such expiry make an offer or agreement which would or might require relevant securities in pursuance of any
such offer or agreement as if the authority conferred by this Resolution had not expired, and that this authority shall be in
substitution for all previous authorities conferred upon the Directors pursuant to section 551 of the Act.
7. That the Company be generally and unconditionally authorised, in accordance with Article 9 of its Articles of Association
and Section 701 of the Act to make market purchases (within the meaning of Section 693 of the Act) of ordinary shares of 5p
each of the Company on such terms and in such manner as the Directors may from time to time determine provided that:
a.
the maximum number of ordinary shares authorised to be purchased is 3,202,232;
b.
c.
the minimum price which may be paid for an ordinary share is 5p (exclusive of expenses and advance corporation tax, if
any, payable by the Company);
the maximum price which may be paid for an ordinary share is an amount equal to 105% of the average of the middle
market quotations for an ordinary share of the Company derived from the London Stock Exchange for the five business
days immediately preceding the day on which the ordinary share is purchased (exclusive of expenses and advance
corporation tax, if any, payable by the Company); and
d.
the authority conferred shall expire at the conclusion of the next Annual General Meeting of the Company except that
the Company may, prior to such expiry, make a contract to purchase its own shares which will or may be completed or
executed wholly or partly after such expiry.
8. That the Directors be empowered pursuant to Section 571 of the Act to allot equity securities (as defined in Section 560(1)
of the Act) for cash pursuant to the authority conferred upon them by Resolution 7 as if Section 561 of the Act did not apply
to any such allotment provided that such power shall be limited:
a.
b.
to the allotment of equity securities in connection with a rights issue or other offer in favour of holders of ordinary shares
where the equity securities respectively attributable to the interests of all the ordinary shareholders are proportionate
(as nearly as may be) to the respective number of ordinary shares held by them subject to such exclusions or other
arrangements as the Directors may consider appropriate to deal with fractional entitlements or legal or practical difficulties
under the laws of any territory or the requirements of a regulatory body; and
to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal
amount of £160,112 and shall expire on whichever is the earlier of the conclusion of the next Annual General Meeting of
the Company or the date falling 15 months from the date of the passing of this Resolution, except that the Company may,
before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such
expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred by
this Resolution had not expired.
97
Notice of Annual General Meeting (Continued)
By order of the Board
S M King
28 September 2021
Registered office
Chatteris Business Park
Chatteris
Cambridgeshire
PE16 6SA
98
Notice of Annual General Meeting (Continued)
Avingtrans Plc
Notes to the Annual Report for the year ended 31 May 2021:
Entitlement to attend and vote
1. Only those members registered on the Company’s register of members at close of business on 16 November 2021; or if this
Meeting is adjourned, at close of business on the day two days prior to the adjourned meeting shall be entitled to attend and
vote. The Company encourages shareholders to vote electronically via www.signalshares.com, and to appoint the Chair of the
Meeting as their proxy with their voting instructions.
Attending in person
2. If you wish to attend the Meeting in person, please bring photographic identification with you to the meeting.
Voting
3. You can vote either:
• by logging on to www.signalshares.com and following the instructions;
• You may request a hard copy form of proxy directly from the registrars, Link Asset Services (previously called Capita), on
Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30, Monday to Friday
excluding public holidays in England and Wales).
•
in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the
procedures set out below.
Appointment of proxies
4. Shareholders are entitled to appoint another person as a proxy to exercise all or part of their rights to attend and to speak and
vote on their behalf at the Meeting. As set out in note 1 above, the Company encourages shareholders to appoint the Chair of the
Meeting as their proxy with their voting instructions. A shareholder may appoint more than one proxy in relation to the Meeting
provided that each proxy is appointed to exercise the rights attached to a different ordinary share or ordinary shares held by that
shareholder. A proxy need not be a shareholder of the Company.
5. If you are not a member of the Company but you have been nominated by a member of the Company to enjoy information
rights, you do not have a right to appoint any proxies under the procedures set out in this “Appointment of proxies” section.
6. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will
vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
Appointment of proxy electronically
7. In order to reduce the Company’s environmental impact, members are encouraged to appoint a proxy electronically. This can be
done by:
•
logging onto www.signalshares.com and submitting a proxy appointment online by following the instructions. If you have
not previously done so, you will need to register. To do this, you will need your Investor Code detailed on your share
certificate (or otherwise available from the Company’s registrar, Link Asset Services); or
•
submitting (if you are a CREST member) a proxy appointment electronically by using the CREST voting service.
Please note that proxy appointments must be received by no later than 1100 a.m. on 16 November 2021 to be valid.
Appointment of proxy using hard copy proxy form
8. To appoint a proxy using the hard copy proxy form, the form must be completed and signed and sent or delivered to Link Group,
Central Square, 10th Floor, 29 Wellington Street, Leeds, LS1 4DL; and received by Link Asset Services of PXS, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU no later than 11:00am on 16 November 2021.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by
an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or
authority) must be included with the proxy form.
Appointment of proxy by joint members
9. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted
by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear
in the Company’s register of members in respect of the joint holding (the first-named being the most senior).
99
Notice of Annual General Meeting (Continued)
Changing proxy instructions
10. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another
hard-copy proxy form, please contact Link Group, Central Square, 10th Floor, 29 Wellington Street, Leeds, LS1 4DL.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of
proxies will take precedence.
Termination of proxy appointments
11. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods:
• By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment Link Group, Central
Square, 10th Floor, 29 Wellington Street, Leeds, LS1 4DL.
•
In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on
its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other
authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be
included with the revocation notice.
In either case, the revocation notice must be received by the Link Group, Central Square, 10th Floor, 29 Wellington Street,
Leeds, LS1 4DL. no later than 16 November 2021 at 11.00am.
Crest
12. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do
so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available
from www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST
members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will
be able to take the appropriate action on their behalf.
13. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a
‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications
and must contain the information required for such instructions, as described in the CREST Manual. The message must be
transmitted so as to be received by the issuer’s agent (ID RA10) by 11:00am on the 16 November 2021. For this purpose, the
time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST application
host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee
through other means.
14. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK &
Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and
limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed
a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be
necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat
as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001
Issued shares and total voting rights
15. As at 11:00 am on 28 September 2021, the Company’s issued share capital comprised 32,022,320 ordinary shares of 5p each.
Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting
rights in the Company as at 11.00am on 28 September 2021 is 32,022,320.
Documents on display
16. The following documents will be available for inspection at Chatteris Business Park, Chatteris, Cambridgeshire PE16 6SA from
29 October 2021 until the time of the Meeting and for at least 15 minutes prior to the Meeting and during the Meeting:
• Copies of the letters of appointment of the directors of the Company.
100
The Strategy
in action
Pinpoint-Invest-Exit
Pinpoint
Strengthening the energy market portfolio
Acquisition of Magnetica
In January 2021, the Group acquired a majority stake in Magnetica. The
acquisition will see the Group’s two medical equipment businesses,
Scientific Magnetics and Tecmag, merge with Magnetica.
Magnetica Limited is an Australian medtech and engineering company
which specialises in next-generation MRI technologies. Combined with
Avingtrans’ subsidiary SciMag – a UK-based business that designs,
manufactures, tests and installs bespoke superconducting magnet systems
– and its US subsidiary Tecmag, which manufactures instrumentation for
NMR, NQR and MRI markets we have the inhouse capability to create an
innovative, niche-MRI helium free systems supplier addressing specific
parts of the market, not well served by dedicated products at present
including orthopaedic imaging and veterinary imaging.
Invest
Establishing world class capability
Booth site rationalisation and factory extension
A new strategic path for Booth changed the make vs
buy criteria and led to some rationalisation. The Booth
site rationalisation is close to completion and
permission for a new extension has been obtained. The
construction phase was delayed by Covid-19 and is due
to be completed in FY22. Booth has a strong order
book which is supporting positive structural investment
for its future.
0011551_Avingtrans_Report_2021_v5.indd 5
0011551_Avingtrans_Report_2021_v5.indd 5
30/09/2021 11:57
30/09/2021 11:57
Exit
Returning share-holder value
“
Avingtrans is quietly confident
about the current strategic
direction and potential future
Exit opportunities
Disposal of Peter Brotherhood
Peter Brotherhood was acquired for £9.3m as part of
the acquisition of HTG in August 2017.
In March 2021 it was sold for an enterprise value of
£35.0m representing a return on capital of almost 4X.
This is AVG’s 3rd successful exit for the Group since
2013, with the disposal of JenaTec in 2013 for £14.5m
(purchased for £4.0m) and Sigma Components in 2016
for £65.0m (purchased for £22.0m).
Avingtrans is committed to medium and longer term
development plans, with the focus on exiting
businesses at advantageous valuations, at which point
proceeds can be considered for return to shareholders
in a tax efficient manner, or redeployed for continued
growth in shareholder value.
0011551_Avingtrans_Report_2021_v5.indd 6
0011551_Avingtrans_Report_2021_v5.indd 6
30/09/2021 11:57
30/09/2021 11:57
Exit
Exit
Returning share-holder value
Disposal of Peter Brotherhood
Peter Brotherhood was acquired for £9.3m as part of
the acquisition of HTG in August 2017.
In March 2021 it was sold for an enterprise value of
£35.0m representing a return on capital of almost 4X.
This is AVG’s 3rd successful exit for the Group since
2013, with the disposal of JenaTec in 2013 for £14.5m
(purchased for £4.0m) and Sigma Components in 2016
for £65.0m (purchased for £22.0m).
Avingtrans is committed to medium and longer term
development plans, with the focus on exiting
businesses at advantageous valuations, at which point
proceeds can be considered for return to shareholders
in a tax efficient manner, or redeployed for continued
growth in shareholder value.
“
Avingtrans is quietly confident
about the current strategic
direction and potential future
Exit opportunities
Performance
5 YEAR PERFORMANCE
Revenue
n
o
i
l
l
i
M
£
n
o
i
l
l
i
M
£
n
o
i
l
l
i
M
£
e
c
n
e
P
100
80
60
40
20
0
100
80
60
40
20
0
15
12
9
6
3
0
25
20
15
10
5
0
25
20
Net Assets
EBITDA
(adjusted)
EPS – Diluted
(adjusted)
Results presented are from continuing
operations.
IFRS 16 was adopted in 2020 and both
IFRS 15 and IFRS 9 were adopted in
2019. Prior periods have not been
restated.”
92.0
86.0
98.5
57.4
20.9
2017
2018
2019
2020
2021
99.0
69.1
69.3
69.9
44.9
2017
2018
2019
2020
2021
12.5
7.0
5.9
3.9
0.2
2017
2018
2019
2020
2021
22.4
8.0
8.0
6.4
0.5
2017
2018
2019
2020
2021
0011551_Avingtrans_Report_2021_v5.indd 6
0011551_Avingtrans_Report_2021_v5.indd 6
30/09/2021 11:57
30/09/2021 11:57
0011551_Avingtrans_Report_2021_v5.indd 7
0011551_Avingtrans_Report_2021_v5.indd 7
30/09/2021 11:57
30/09/2021 11:57
www.avingtrans.plc.uk
0011551_Avingtrans_Report_2021_v5.indd 8
0011551_Avingtrans_Report_2021_v5.indd 8
30/09/2021 11:57
30/09/2021 11:57