Sellafield was once prized as the world’s first commercial nuclear power station, providing the UK with electricity from the 1950s until 2003.
Recently, however, it has largely been viewed as a problem. The size of a small town, this remote spot in Cumbria holds thousands of tons of nuclear waste, which needs to be packaged and securely stored as part of a decades-long decommissioning process.
Metalcraft will play a key part in that project. Owned by AIM-listed Avingtrans, Metalcraft makes ultra-strong, three metre cubed steel boxes, to house waste from the Sellafield silos. The firm has already been awarded a contract of up to £70million to supply about 1,000 units over the next six years. But more contracts are likely, as Sellafield will need some 70,000 containers over the next three decades and few firms have the technical ability to make them.
Boxing clever: Avingtrans has a contract to contain waste for the Sellafield nuclear reprocessing plant in Cumbria
Avingtrans finds troubled engineering firms, buys them at a cut-price rate, turns them round and sells them at a profit.
The shares are £4 each and should increase in value as Avingtrans management is highly experienced and has delivered more than a decade of robust returns and dividend growth.
Some businesses are kept for years. Some are sold relatively quickly. Many are bundled together to create a whole that is more than the sum of its parts.
Metalcraft, for instance, originally focused on the medical and scientific markets but merged with another firm in 2013 and has since become one of the leading providers of nuclear waste containers.
Avingtrans has many other businesses in its stable. Booth Industries makes exceptionally durable doors for use in high-pressure environments, including HS2 tunnels, where doors will need to stay firm as trains rattle past at 225mph.
Bolton-based Booth was on the brink of collapse when Avingtrans acquired the firm for £1.8million in 2019. Today, Booth is profitable and will probably be sold for a significant sum in the next year or so.
Avingtrans also rescued Hayward Tyler, an AIM business that fell into difficulties. Acquired in 2017, the firm is now in rude health, supplying pumps and motors for use in tough environments, such as offshore oil rigs, solar power plants and chemical processing sites.
Avingtrans chief executive Steve McQuillan, an engineer by background, has been at the helm since 2008. Finance director Stephen King, another qualified engineer, has worked at the firm for even longer, joining in 2002.
Over the years, the two have bought and sold dozens of businesses, always centred on complex engineering products that are hard to replicate and are in demand year in, year out.
Many of these firms work in the energy and power sectors but there is a medical devices arm too.
Magnetica, acquired last year, is developing mini-magnetic resonance imaging (MRI) machines that are cheaper and faster than traditional large-scale kit.
The mini-versions are due to be launched next year but Avingtrans is already seeing demand from orthopaedic surgeons and even from vets, who would use the kit to scan ailing pets.
Interim results, out this week, are expected to show that Avingtrans is making good progress.
That should feed through into robust annual figures with brokers predicting turnover of £101million for the year to May 31, 2022, alongside profits of £7.8million and a 4.2p dividend.
Next year’s numbers are likely to be materially stronger, with turnover of £110million, profits of £9million and a 4.4p dividend. There is always the possibility of special dividends too, when certain businesses are sold.
Many companies are worried about rising inflation, but McQuillan and King are quietly confident. The group operates in countries around the world, it can pass on many of the price rises that it incurs and contracts are often inflation-linked.
A tougher environment is also likely to throw up opportunities to purchase businesses in distress, though the group is highly selective, seeing about 100 companies a year but only buying one or two.
Avingtrans is lean at the centre, with no fancy headquarters or management minions, but it takes responsibilities to staff seriously, with an apprentice academy and training school for young British engineers. This helps create more skilled UK workers but also makes Avingtrans less vulnerable to staff shortages and employee turnover.
Midas verdict: Avingtrans is a well-run business with a track record of success. At £4, the shares are a buy.
Traded on: AIM Ticker: AVG Contact: avingtrans.plc.uk or 01354 692 391
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