Avingtrans Share Discussion Threads

[puffintickler] 11/6/2016 08:35

Dozey3

Relax.

It always takes time to organise cash back. There are lots of tax implications to consider and people to consult.

This company has no history of shafting shareholders.

[dozey3] 10/6/2016 22:36

Fact is none of us is sure what's happening, and it's time a decision was made and we were told. My fear is that they will find a 'golden' opportunity to toss all the cash away without handing any back. Why the delay?

[dgwinterbottom] 08/6/2016 07:41

"Not sure if shareholders will receive a return of cash or whether the management will implement share-buybacks instead. It was stated at the recent meeting it would be done to the most beneficial tax situation. Be interesting to see the way it goes given the size of the Chairmans/Wife holding!

[nurdin] 07/6/2016 20:58

Thanks GHF.

[cfro] 07/6/2016 13:48

Pleased to see you invested here GHF! :-)

I've actually been buying more today and also see exceptional value here.

Not sure if shareholders will receive a return of cash or whether the management will implement share-buybacks instead. Would prefer the former form of return to shareholders myself, but the latter could also be a very interesting route..

[glasshalfull] 06/6/2016 23:06

finnCap reiterated their BUY recommendation for the company today, based on AVG now holding c. £47m net cash or 173p per share (versus 180p mid price). Remaining business is in for free.

They also suggest that c. £28m or 100p may be repatriated to shareholders leaving c. £20m for acquisitions.

"The group has has now completed the Aerospace disposal for £65m, with net proceeds of £52m. This leaves the group with net cash of around £47m, or 173p per share, a significant proportion of which will be repatriated to shareholders, leaving the group with a war chest estimated at c£20m for acquisitions.

The group will be keen to utilise cash on EPS enhancing acquisitions in precision engineering, probably targeting areas that boost its nuclear and energy sector capabilities. 

We reintroduce forecasts, which eliminate the Aerospace operations, with unchanged underlying trading assumptions but also factor in a £28m return of shareholders capital.

In addition, 2018 forecasts see a significant uplift in profits as the Sellafield contract kicks in. Our forecasts have upside potential, with EPS-enhancing acquisitions and with recovery potential in the oil & gas sector, both of which remain outside our current forecasts."

The broker has adj EPS of 108p for year just ended following the Aerospace Division sale & indicates AVG will be on a PER 13.7 for 2017/18 prior to deployment of the cash on acquisitions.

Look good value IMHO.

Kind regards,
GHF

[noahgender] 02/6/2016 15:17

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[dgwinterbottom] 01/6/2016 08:17

Cerrito - my pleasure dear chap!!

[cerrito] 01/6/2016 00:21

Just caught up DGWinterbottom with your excellent report for which I thank you.

[nw1234] 26/5/2016 10:42

DG - Thank you for the comprehensive write-up.

pldazzle - I totally agree with the BQE comparison

[dgwinterbottom] 26/5/2016 10:27

pldazzle - I feel you may be correct, nothing was mentioned at all re a special dividend, I gained the impression it would be by share buyback it was merely the mechanism that was to be confirmed.

[pldazzle] 26/5/2016 07:34

Bookbroker - I'm not so sure. Compare BQE, similar situation/similar cash/similar size, where they're going for a tender buyback of half the share capital.
Remember that for PIs a special dividend means up to 38.1% tax, compared with 20% CGT. Powerful disincentive.
Edit - link added

[bookbroker] 25/5/2016 22:17

More likely there will be a special dividend, they will have far more cash than required, could be at least 50p a share, simply too small to start buying back stock and Wray will continue to hold on to his stock I assume!

[rogerrail] 25/5/2016 21:14

DG, Good stuff, we are again indebted to you. Slightly dissapointed there is not an aquisition already lined up so question the timing of disposal. Share buyback is exactly that, dipping into the market to buy shares on any dip thereby reducing the number in circulation. Not sure how well it can be executed here given the poor liquidity.

[dgwinterbottom] 25/5/2016 20:44

A short but informative meeting attended by myself and Brian Gee as the only investors other then the Chairman Roger McDowell, CEO Steve McQuillan and FD Stephen King in addition to a representative from the legal advisors.

As normal practice for the Chairman, official protocol was despatched quickly advising there was an overwhelming majority in favour of the motion to sell the Aerospace division with just 100 votes against. The meeting was then opened to questions…R30;.from the two of us!!

The EV to Equity was somewhat distorted as there were modifications after the lock box these included the Rolls Royce Pipe/Tube Unit £3.5m, Working Capital Adj £1.5m, Debt, Overdraft & Tax £1.7m and the Retention in Escrow £1.7m there is also an insurance cost for this of £300k. In terms of the return to shareholders this was not yet finalised but may well be a share buyback as being the most tax efficient, the unknown factor about this of course is how many would take up the offer. I am not familiar as how this works, if one decides to keep ones shares, other than the fact one’s holding now becomes a greater proportion of the lower shares in circulation. I asked why the decision had been reached to sell the division that up to now had been the “Jewel in the Crown”, the Chairman quite correctly said the raison d’être of any Company is to maximise value for shareholders. The Board had realised that the Aerospace division had grown through a series of small, good value acquisitions that had combined to give an enhanced value overall and the value that might be realised at this point in time had probably the greatest margin available. It had been considered that to grow the division further could probably only be effected by starting a satellite in the US and this would itself bring many risks if not only from the geographic aspect hence the decision was reached, to realise the best value now.

There were 10 bids for the division of which 8 were very close in terms of their offers that proved to be a good indication of the inherent value. The initial offer went some way down the road before breaking down and reassessment of the remaining bids.

Turning to the remaining division E & M includes Crown that is busy with road traffic pole signage together with the production of Siemens MRI Scanners that whilst ticking over is not the volume envisaged for reasons previously indicated.
The division is involved with the Future Environmental Technology (FET) where they have manufactured the equipment for the project whereby the CO2 from electrical power by Diesel motor generation is captured and, by a process of electrolysis, turned into Formic Acid for which there is a good market. The division has the exclusive licence to manufacture this equipment and the market is expected to grow as industry is rapidly looking to equip themselves with diesel generators in anticipation of the “lights going out” due to the lack of national generating capacity. Indeed the comment was made that there is a possibility that Hinckley Point will not ultimately go ahead. This brings us to the next market for business that will be the requirement for life extensions to current nuclear PS due to their preference to coal fired power stations that are being closed at a significant rate. The Board believes there will be considerable opportunities in this area in the future in addition to those relating to nuclear decommissioning. In this area the work up for the manufacture of the 3M3 boxes has been somewhat slower than hoped due to Sellafield programme delays though the production line is well advanced in anticipation of manufacture, this being paid for by Sellafield. There are some five companies in the UK capable of undertaking the work and the Board believes they will probably award work to 3 over the life of the contract. Given the ultimate order over 20 years is for some 40,000 boxes this represents only 50% of that required as Magnox will probably have a similar requirement further down the road. Good prospects are envisaged with Rapiscan as previously announced and also future work with Bruker. The turnover of the division will be muted this financial year due to this “work up” with the benefits to be realised thereafter. In the meantime Maloney continues to progress current oil/gas contracts albeit subject to some delays and continue to manufacture ad hoc items such as valves for the nuclear industry that only they are capable of manufacturing.

The Board stated that the utilisation of the proceeds will be used very carefully for acquisitions that will only be undertaken once they are satisfied that they will benefit the overall business and are available at the right price and they will take their time in the evaluation process.

One thing that was clarified for me was the status of the Composites unit in that the Aerospace division will be entitled to manufacture composite pipes for aerospace use only; inter alia the remaining E&U division are prohibited from manufacturing such pipes for aerospace applications. The IPR rates will stay with E&M as other applications for the technology are envisaged for the future, furthermore they see good prospects for the Composite Division as they withdraw from the Formula 1 business that hitherto was a market.

In conclusion a lot of issues have become clearer for me after today and the decision of the Board to sell the Aerospace division is largely justified after hearing the reasons and the issues raised. Without doubt there is far more opportunity within the nuclear decommissioning market than could be foreseen with the aerospace division in its current form. I hope this report has shed some light on questions that may have arisen!!

[wiseacre] 25/5/2016 14:56

This company is a little jewel that deserves a pollish.

[briangeeee] 25/5/2016 00:17

Yes, I'll probably attend.

[dgwinterbottom] 24/5/2016 08:25

Anyone else looking to attend the meeting tomorrow?

[rogerrail] 17/5/2016 13:29

DG

as I alluded to in my post 2262 above , but PRES also impacted by fall in oil and gas price. Nevertherless I understand greenlane is a good investment for them which they plan to build on.

[dgwinterbottom] 17/5/2016 10:32

" similar to how PRES setup Greenlanebiogas?" indeed Roger but it would appear that PRES Greenlanebiogas was so overhyped that is what lead to the collapse of the sp!!

[rogerrail] 17/5/2016 10:02

Just a hunch , the contract for Highview power I mentioned a few weeks back may have opened the BoD's eyes to the possibilities in the renewables sector , perhaps a joint venture is on the cards similar to how PRES setup Greenlanebiogas?

[rogerrail] 17/5/2016 09:40

IMO they should look elsewhere, not overly keen on the oil and gas sector although there is plenty of life still left in it.

[dgwinterbottom] 16/5/2016 18:01

Roger - Fair comment re PRES, but bear in mind AVG have a knowledgeable oil and gas man on the Board, namely Les Thomas CEO of Ithaca energy. They could close the manufacturing element and keep the design team like they did with Maloney!!!