Avingtrans energy division 'severely challenged' by oil price fall

25th Feb 2015 11:57

Shares in component manufacturer for the medical, energy, industrial and aerospace sectors Avingtrans fell 9.5% on Wednesday due to forecasts of aerospace customer reductions and the decline of oil prices.Revenues in the group dropped 14% to £27.5m during the first half of the year as the slump in oil prices affected its energy and medical division.Its aerospace division was affected by the reduction of customer volumes, driving profits down during the period. Chairman Roger McDowell said the oil sector forecast "can't get materially any worse for us, so we anticipate an improved result in the second half".Profits before tax fell sharply by 91% to £259m, driving earnings per share to drop from 10.7p to 0.8p.Cash and equivalents also declined significantly from £1.74m to a negative balance of £1.2m.The group issued a profit warning in November, saying it would be hit by a number of short-term issues across its divisions.Since then, Avingtrans has taken restructuring actions and says to have a plan to relocate the manufacturing facility at Aldridge to Chatteris. The Aldridge facility will be sold in a bid to try to improve its cash position.McDoweel said on Wednesday: "Our first half results have been impacted by previously reported external factors, so I am pleased to report that we grasped the nettle of restructuring quickly."Our faith in the aerospace, energy and medical markets is undiminished and we are forging ahead with our strategy, despite short-term set-backs."Our confidence in our full year expectations is underlined by our continued dividend progression, which investors will, no doubt, welcome."Numis analysts said the results suggested the group is "back on track", giving a 'add' recommendation and a target price of 138p.FinnCap broker said: " Despite this weaker backdrop, we retain our existing forecasts while raising our price target to 135p and maintain our 'buy' rating."Shares fell 9.52% to 104.5p at 11:55.