Avon Rubber

LN: AVON

£605.6m market cap

1952p last close

Avon Rubber designs, develops and manufactures products in the protection (72% of 2019 sales) and dairy (28%) sectors. Its major contracts are with national security organisations such as the US DOD. Over 70% of 2019 sales were from the US.

Investment summary

Avon delivered FY19 modestly ahead of market expectations, as foreshadowed in the September trading update. New US mask systems contracts drove healthy organic growth for Avon Protection and, while milkrite | InterPuls sales were essentially flat, a progressive recovery in dairy markets allowed it to make up the shortfall experienced in Q119. Both divisions are expected to carry the positive momentum into FY20, with margins expected to improve in both divisions. The proposed record acquisition of 3M’s ballistic protection assets should substantially enhance earnings, and this has driven the re-rating in recent months.

Y/E Sep
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 165.5 35.3 27.2 76.6 25.5 17.8
2019A 179.3 39.5 31.4 90.9 21.5 39.2
2020E 184.8 42.5 33.7 88.8 22.0 12.2
2021E 194.3 45.5 36.4 95.9 20.4 14.2
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 active dialogue for the M50 replenishment phase should extend the programme for at least another 15 years, plus a focus on higher price sophisticated mask systems provides a further opportunity. 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 06/12/2019
Sector
Industrials
Share price graph
Balance sheet
Forecast net cash (£m) 74.7
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual 7.3 16.2 49.6
Relative* 8.4 15.5 36.6
52-week high/low 2075.0p/1180.0p
*% relative to local index
Key management
David Evans Chairman
Paul McDonald CEO
Nick Keveth CFO

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