Avingtrans drops after warning on profit

24th Nov 2014 11:56

Avingtrans took a hit on Monday after warnings profit would be hit by a number of short-term issues across its divisions in its latest trading update.As a result, the group now expects revenue and profitability for the current financial year to be similar to that reported for the 2014 financial year, excluding the revenue and initial losses from the RMDG acquisition.Within its Aerospace division, short-term demand has been affected by the significant restructuring of one of its key customers.In response, the company has decided to broaden its site rationalisation plans, which will deliver greater production efficiency and cost improvements to the Sigma Components.It said: "This extensive programme involves the closure and merging of our Derby site into Swadlincote (formerly RMDG) and the reorganisation of Buckingham Composites. Farnborough will concentrate on complex fabrications, while our Hinckley rigid pipe centre of excellence will further rationalise machining, resulting in an increased role for Sigma Chengdu."Within Energy and Medical, the group has been affected by the steep decline in the oil price and the subsequent delays in a number of project decisions, meaning the group has had to implement an accelerated cost reduction program across the division.This will involve the closure and sale of the Maloney Aldridge site, which is already in progress. Following the resulting transfer of the design and engineering activities to new offices, manufacturing will be transitioned to an outsourced global supply chain, both lowering cost and improving logistics.In the Medical business, the rate of production in China remained low, but demand from Siemens stabilised and the slow ramp-up in their activity continued. The group is also seeing increased activity with other medical market prospects."We have attractive structural growth markets and durable customer relationships and, despite these short-term challenges, we believe that the prospects for the group are exciting," it said."The steps set out above will improve operational efficiency and we expect the full year impact of these actions to be approximately £0.6m, the full benefit of which will be reflected in the 2016 financial year."Notwithstanding our revised expectations, it is anticipated that the board will maintain a progressive dividend in respect of the current financial year, reflecting our confidence in the overall prospects for the group."