Avon Rubber

LN: AVON

£746.1m market cap

2220p 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 is delivering on its growth strategy focused on growing the core, adding selective product development and making value-enhancing M&A. The proposed purchase of 3M’s ballistic protection assets should boost EPS by c 20% in a full year when it completes in H120. FY19 results were slightly ahead of recently increased estimates, with EPS boosted by a tax release, building momentum into FY20.

Y/E Sep
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 165.5 35.3 27.2 77.1 31.2 22.0
2019A 179.3 39.5 31.4 91.7 26.2 48.3
2020E 233.0 47.3 35.4 93.9 25.6 15.2
2021E 256.4 55.4 43.6 115.7 20.8 14.5
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 23/01/2020
Sector
Industrials
Share price graph
Balance sheet
Forecast net debt (£m) 4.4
Forecast gearing ratio (%) 4
Price performance
%
1m
3m
12m
Actual 17.9 40.3 87.2
Relative* 17.4 31.7 69.6
52-week high/low 2485.0p/1180.0p
*% relative to local index
Key management
David Evans Chairman
Paul McDonald CEO
Nick Keveth CFO

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