Avon Rubber

LN: AVON

£1048.6m market cap

3380p last close

Avon Rubber designs, develops and manufactures products in the protection (77% of H120 sales) and dairy (23%) sectors. Its major contracts are with national security organisations such as the US DOD. Over 75% of H120 sales were from the US.

Investment summary

The announcement that Avon Rubber is to sell milkrite | InterPuls, its dairy division, to DeLaval Holding for £180m gross proceeds is strategically logical and financially compelling. The fit of dairy and defence has always looked slightly anomalous and the terms of the deal show that the opportunity to augment dairy through value-accretive deals is difficult given the scale of the business and opportunities. Management must now recycle the cash balances that will be created into Avon Protection, where there are a greater number of potential investments.

Y/E Sep
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2018A 165.5 35.3 27.2 76.6 44.1 30.9
2019A 179.3 41.3 31.4 90.9 37.2 67.8
2020E 233.0 50.2 35.4 93.1 36.3 21.5
2021E 288.4 65.1 49.2 129.5 26.1 17.9
Industry outlook

Avon’s long-standing, multi-level relationship with the US DoD is important to the group and the end market backdrop is supportive. The focus on higher-price sophisticated mask systems is proving successful, with M50 mask system replenishment and the addition of helmets and body armour providing further opportunities. Meanwhile, growth has been encouraging in Farm Services, building greater visibility into the business. We maintain our view that Avon has the market position, product portfolio and strategic ambition to further accelerate its growth through organic and inorganic means.

Last updated on 02/07/2020
Sector
Industrials
Share price graph
Balance sheet
Forecast net debt (£m) 8.7
Forecast gearing ratio (%) 9
Price performance
%
1m
3m
12m
Actual 2.1 37.1 150.4
Relative* 1.9 19.1 199.1
52-week high/low 3380.0p/1252.0p
*% relative to local index
Key management
David Evans Chairman
Paul McDonald CEO
Nick Keveth CFO

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