Avingtrans’ £65m aerospace deal set to benefit West Midlands operation

THE decision by Midlands engineering group Avingtrans to sell its aerospace division will boost the group’s operations in the West Midlands, it has said.

The company has announced it has reached an agreement to sell its Sigma Components operation to Anthony Bidco – a company controlled by funds managed by Silverfleet Capital Partners – for £65m. The firm’s shares rose almost 14% on the announcement.

After adjusting for debt and working capital and associated transaction costs, the proceeds of the deal are likely to be worth £52m to Avingtrans.

Avingtrans is proposing to return a substantial portion of the proceeds of sale to shareholders, although it has not revealed exactly how much. It has said it will update the market with this in due course.

It is also giving a fresh focus to its Energy and Medical divisions, which are served by its Aldridge-based Maloney Metalcraft business.

Steve McQuillan, CEO of Avingtrans, said: “The proceeds of this transaction will enable the return of substantial value to shareholders while also providing additional investment for the Energy and Medical businesses where the board believes there are exciting prospects which have the potential to deliver significant further value for shareholders.”

In a statement to accompany the announcement, Avingtrans said trading in the aerospace division had been marginally ahead of management expectations in terms of profit, driven by the Rolls-Royce pipe business acquisition being ahead of schedule on integration.
 
The company acquired the Rolls-Royce pipe business in March this year, and while this has only been under its ownership for two months, it said the initial signs were encouraging with the business trading in line with our expectations and integration costs lower than expectations.

It added that its Energy and Medical Division continued to recover steadily and was expected to meet management expectations, in terms of profit for the year. However, sales are expected to be somewhat lower than expected, principally due to the Sellafield production start-up taking longer than previously expected; and due to some delays in major gas contracts and prospects.

Nevertheless, it said the board expected revenues would recover in the group’s 2017 financial year.

It said the restructuring of the Energy and Medical Division was now very well advanced. As a result, it was now on a firm footing to take advantage of recent contract wins with Bruker and Rapiscan, as well as building a strong future in the nuclear sector with Sellafield, EDF and other prospective customers.

The £47m, 10-year contract with Sellafield is said to represent less than 10% of the potential business that could be won with the customer.

“Sellafield represents approximately half of the nuclear decommissioning opportunity in the UK for businesses like Metalcraft and similar opportunities exist in other countries. There are also longer term opportunities in nuclear fleet refurbishment and new build with EDF and others,” said the statement.

“Therefore, the board believes that a focus on the exciting prospects in the Energy sector, as well as a secure existing platform in the Medical and Biomedical equipment markets, will provide shareholders with the potential to achieve further value growth, in addition to the proceeds to be returned to shareholders from the disposal.

“Following the proposed transaction, Avingtrans will continue to develop the Energy and Medical markets served by its Metalcraft and Maloney Metalcraft businesses.”

The disposal requires approval from shareholders and the group has convened a general meeting on May 25 to discuss the sale. The meeting takes place at the offices of Shakespeare Martineau, No1 Colmore Square, Birmingham, starting at 11.30am.

• Avingtrans sold the Maloney site last July in a deal worth £1.1m but the front engineering and technical offices were immediately leased back to the business allowing the design and engineering activities to remain at the site.