Investor Visit to Avingtrans (10th October 2011)

Many thanks indeed to Mark for organising yesterday's site visit to Avingtrans (LON:AVG) subsidiary Metalcraft in Chatteris, Cambridgeshire, for the ten or so investors and interested potential investors. This was a fantastic opportunity to see first-hand the craft (& graft!) that goes into products which are then used by their customers globally. Beyond a cursory look at the accounts & website beforehand I knew little of what Avingtrans actually made so it was a very useful visit to a British manufacturer.

We started with a summary presentation by Metalcraft MD Peter Kenny and a Q&A, followed by a tour of the many workshops in which we saw products being bent, welded, blast-painted, etc...  We saw items ranging from generator housings (made for Cummins) and magnet coils which will go into MRI scanners produced by clients Siemens, GE, Philips, Hitachi, Toshiba, etc…  We were told that Metalcraft supplies these magnets for a remarkable 55% of all scanners produced worldwide each year – a truly global leader in this niche market.

The nuclear sector is also an important industry with Metalcraft supplying waste boxes and drums for spent nuclear material, which will find their way to a very deep, final resting place for many thousands of years. Nuclear is a large addressable market in the UK, and now Germany since the Fukushima disaster this year made that country review its energy supply policy, and AVG’s board is considering ways to build-on its current involvement in the nuclear industry with British Nuclear Fuels.

We also learnt that Metalcraft has previously been selected to supply:

• One-third of the inertia tube ring to CERN for the Large Hadron Collider in Switzerland;
• Coating plant for the VISTA telescope in the Atacama Desert, Chile;
• 20m duplex presure vessels to the oil industry for installation in FPSO ships;
• The hulls of small search and rescue submarines to the US Navy;
• Filtration tanks for water utilities.

Whilst the majority of revenue is derived from lower margin volume manufacture, such as the MRI magnets and power generator housing, the projects taken on are important for two reasons: the first being the higher margins these products can be contracted at, and secondly, the higher tolerance demanded in these products with the need to buy-in newer, higher-specification machinery means that Metalcraft’s expertise and knowledge  remains at the cutting edge of technology and allows the company to maintain a technological lead over the lower-spec competition.

We also toured the Fenland Engineering Skills Centre where local schools can send students to improve their skills in welding, machining, & CAD/CAM technologies.  Metalcraft benefits from housing this Skills Centre on their site and training students as they are able to offer apprenticeships to the dedicated, better-skilled school leavers each year – trainees who can start a career at Metalcraft. The company takes 3 or 4 such students on as trainees each year and have taken around 10 to date.

A further presentation/Q&A was given by Avingtrans CEO, Steve McQuillan, ably supported by FD Stephen King.  Questions from the floor concerned where future growth would come from (SMcQ noted that they will be specifically targeting Germany, China and the US), stock and debtors levels, dividends, gearing.

All in all this visit was exceptionally useful in understanding the markets Metalcraft and Avingtrans (LON:AVG) are addressing with their products, which are exported all over the world.  Again, my thanks go to Mark for coordinating both the visit and the (potential) investors and for the team at Chatteris for their hospitality and openness in meeting with the group.  Should you have the chance to attend a similar visit I would highly recommend you take it.

SM