Last close As at 05/08/2026
GBP18.88
▲ 108.00 (6.07%)
Market capitalisation
GBP572m
Avon Rubber’s pre-close trading statement demonstrates the underlying growth in both divisions. Success continues to flow from the enhanced product portfolio and order progression is building visibility. We have made modest changes to our forecasts to reflect currency and the Merrick’s acquisition.
Written by
Avon Rubber |
Delivering growth |
Year-end trading statement |
Aerospace & defence |
14 September 2018 |
Share price performance
Business description
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Avon Rubber is a research client of Edison Investment Research Limited |
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Avon Rubber’s pre-close trading statement demonstrates the underlying growth in both divisions. Success continues to flow from the enhanced product portfolio and order progression is building visibility. We have made modest changes to our forecasts to reflect currency and the Merrick’s acquisition.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/16 |
142.9 |
20.7 |
70.5 |
9.5 |
19.7 |
0.7 |
09/17 |
159.2 |
25.9 |
83.3 |
12.3 |
16.7 |
0.9 |
09/18e |
160.8 |
26.5 |
74.2 |
16.0 |
18.7 |
1.2 |
09/19e |
166.6 |
28.5 |
75.3 |
20.8 |
18.5 |
1.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Pre-close trading update
Avon’s pre-close trading update reflects the strength in its protection markets, with expected full year divisional revenue growth of c 7% on a constant currency basis. This includes slightly higher than guidance deliveries of M50 mask systems to the US Department of Defense. While activity in the law enforcement area has continued to deliver growth, the fire business has continued to reflect the market softness seen in H118. milkrite I InterPuls has seen a step-up in performance in H218, particularly in North America, and is on track to deliver revenue growth of c 4% on a constant currency basis. In June, the company completed the acquisition of the distribution rights to Merrick’s calf nurser product line for $2.1m.
Modest forecast adjustments
We have made modest adjustments to our model to reflect the better than expected dollar translation rate for FY18 and the acquisition of Merrick’s. Looking forward, improved product mix and operational leverage should support operating margin growth in both divisions. For FY19, in the Protection division we reflect the substantial carry-over of 83,000 M50 mask systems plus future success with the M69 Joint Services Aircrew Mask and the M53A1 combined tactical mask and PAPR system. For milkrite I InterPuls, while the Merrick’s acquisition is supportive, we maintain some caution as we keep a watch on feedstock pricing.
Valuation: Premium justified
Taking an average of our DCF and our sum-of-the-parts valuations gives a fair value price of 1,499p vs 1,450p previously. This reflects the uplift in peer group multiples. On a FY18e P/E of 18.7x, the stock continues to trade at a premium to its UK aerospace and defence peer group. We feel this premium is justified given its exposure to the growing US defence budget environment and the heightened chemical, biological, radiological and nuclear (CBRN) global threat.
Changes to financials
The following table outlines the changes to our forecasts.
Exhibit 1: Revised forecasts
£000s |
2018e |
2019e |
||||
|
Prior |
New |
% change |
Prior |
New |
% change |
Avon Protection |
108,702 |
110,898 |
2.0% |
111,963 |
114,225 |
2.0% |
milkrite I InterPuls |
50,635 |
49,894 |
(1.5)% |
53,167 |
52,389 |
(1.5)% |
Total Sales |
159,337 |
160,792 |
0.9% |
165,130 |
166,614 |
0.9% |
EBITDA |
36,254 |
35,935 |
(0.9)% |
38,373 |
38,324 |
(0.1)% |
Avon Protection |
20,436 |
20,405 |
(0.2)% |
21,681 |
21,648 |
(0.2)% |
milkrite I InterPuls |
8,203 |
8,233 |
0.4% |
9,145 |
9,011 |
(1.5)% |
Unallocated |
(2,000) |
(2,000) |
0.0% |
(2,000) |
(2,000) |
0.0% |
Underlying EBITA |
26,639 |
26,638 |
0.0% |
28,825 |
28,659 |
(0.6)% |
Underlying PTP |
26,464 |
26,453 |
0.0% |
28,479 |
28,496 |
0.1% |
EPS - underlying continuing (p) |
74.3 |
74.7 |
0.5% |
75.3 |
75.8 |
0.6% |
DPS (p) |
16.0 |
16.0 |
0.0% |
20.8 |
20.8 |
0.0% |
Net debt/(cash) |
(49,703) |
(46,173) |
(7.1)% |
(67,995) |
(64,502) |
(5.1)% |
Source: Edison Investment Research
Exhibit 2: Financial summary
£000s |
2016 |
2017 |
2018e |
2019e |
||
Year end 30 September |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
142,884 |
159,200 |
160,792 |
166,614 |
Cost of Sales |
(90,159) |
(101,500) |
(102,515) |
(106,227) |
||
Gross Profit |
52,725 |
57,700 |
58,277 |
60,387 |
||
EBITDA |
|
|
29,922 |
36,300 |
35,935 |
38,324 |
Operating Profit (before amort. and except.) |
|
|
24,031 |
30,300 |
29,635 |
32,021 |
Intangible Amortisation |
(3,154) |
(4,200) |
(2,997) |
(3,362) |
||
Exceptionals |
(4,808) |
(7,000) |
(4,002) |
(4,004) |
||
Other |
(33) |
(35) |
(36) |
(38) |
||
Operating Profit |
16,036 |
19,065 |
22,600 |
24,617 |
||
Net Interest |
(154) |
(200) |
(148) |
(125) |
||
Profit Before Tax (norm) |
|
|
20,690 |
25,865 |
26,453 |
28,496 |
Profit Before Tax (FRS 3) |
|
|
15,882 |
18,865 |
22,452 |
24,492 |
Tax |
1,824 |
2,900 |
(3,148) |
(4,661) |
||
Profit After Tax (norm) |
21,765 |
25,500 |
22,750 |
23,081 |
||
Profit After Tax (FRS 3) |
17,706 |
21,765 |
19,303 |
19,831 |
||
Average Number of Shares Outstanding (m) |
30.3 |
30.4 |
30.5 |
30.5 |
||
EPS - normalised (p) |
|
|
70.5 |
83.3 |
74.2 |
75.3 |
EPS - (IFRS) (p) |
|
|
58.5 |
71.5 |
63.4 |
65.1 |
Dividend per share (p) |
9.5 |
12.3 |
16.0 |
20.8 |
||
Gross Margin (%) |
36.9 |
36.2 |
36.2 |
36.2 |
||
EBITDA Margin (%) |
20.9 |
22.8 |
22.3 |
23.0 |
||
Operating Margin (before GW and except.) (%) |
16.8 |
19.0 |
18.4 |
19.2 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
77,469 |
66,700 |
62,946 |
56,281 |
Intangible Assets |
47,357 |
40,400 |
39,332 |
36,005 |
||
Tangible Assets |
30,112 |
26,300 |
23,614 |
20,277 |
||
Investments |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
52,886 |
80,500 |
101,586 |
122,478 |
Stocks |
20,648 |
21,800 |
22,511 |
23,559 |
||
Debtors |
19,968 |
23,800 |
23,315 |
24,159 |
||
Cash |
4,495 |
26,500 |
47,560 |
66,560 |
||
Other |
7,775 |
8,400 |
8,200 |
8,200 |
||
Current Liabilities |
|
|
(36,641) |
(39,000) |
(39,913) |
(41,654) |
Creditors |
(34,142) |
(37,200) |
(38,525) |
(39,595) |
||
Short term borrowings |
(2,499) |
(1,800) |
(1,387) |
(2,059) |
||
Long Term Liabilities |
|
|
(51,713) |
(52,600) |
(52,558) |
(52,516) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(51,713) |
(52,600) |
(52,558) |
(52,516) |
||
Net Assets |
|
|
42,001 |
55,600 |
72,062 |
84,590 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
30,504 |
29,754 |
34,490 |
35,504 |
Net Interest |
(147) |
(154) |
(200) |
(148) |
||
Tax |
(17) |
2,900 |
(3,148) |
(4,661) |
||
Capex |
(6,838) |
(5,500) |
(8,943) |
(6,001) |
||
Acquisitions/disposals |
(3,300) |
0 |
4,400 |
0 |
||
Financing |
(1,812) |
(1,000) |
(1,000) |
(1,000) |
||
Dividends |
(2,430) |
(3,200) |
(4,126) |
(5,366) |
||
Other |
(803) |
(96) |
0 |
0 |
||
Net Cash Flow |
15,157 |
22,704 |
21,473 |
18,328 |
||
Opening net debt/(cash) |
|
|
13,161 |
(1,996) |
(24,700) |
(46,173) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(1,996) |
(24,700) |
(46,173) |
(64,502) |
Source: Company reports, Edison Investment Research
|
|
Research: Industrials
H118 was successful for IBU-tec on several fronts. Revenues were back to almost H117 levels, as strong growth in demand for battery materials offset continued weakness in demand for materials used in automotive catalytic converters. Management achieved the objective set out at the IPO of purchasing a new site in Bitterfeld where more complex and hazardous materials can be processed in volume. It also purchased BNT Chemicals, more than doubling the revenues and adding complementary chemistries.