Avingtrans has announced another material contract, for original equipment for the oil & gas market, for its Peter Brotherhood subsidiary. Peter Brotherhood will supply steam turbines for a new floating production vessel for an offshore & marine customer. The contract is worth in excess of £10m, with delivery expected primarily during Avingtrans’ FY20. This follows last week’s announcement of an aftermarket contract for nuclear life extension, worth over £10m across FY21 and FY22, for its Hayward Tyler business. We have increased our FY20 adjusted PBT forecast by 6%, reflecting strong contract momentum, ahead of that implicit in our previous estimates. Our net debt forecast has also increased to reflect working capital absorption from the end of FY19, reversing over the term of the contract. Our updated forecasts put the shares on EV/EBITDA multiples of 8.5x FY19 and 7.1x FY20. These appear undemanding given the group’s strong sales momentum and increasing profitability, as management focuses on building value in this latest cycle of its successful buy, build and sell strategy.
