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▲ 108.00 (6.07%)
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Research: Industrials
Avon Technologies’ FY24 results show the continued momentum seen throughout the year, with revenue growth of 12.2% y-o-y ($275m), adjusted operating profit growth of 53.4% y-o-y ($31.6m) and a record closing order book value of $225m, up 64.3% y-o-y. Return on invested capital (ROIC) grew 500bp y-o-y to 13.7%. Given Avon’s record order pipeline, disciplined capital allocation and strong cash generation, management expects the company to achieve both its medium-term operating margin (14–16%) and ROIC (>17%) targets a year ahead of schedule in FY26.
Avon Technologies |
Record order book driving confident outlook
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Industrials |
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22 November 2024 |
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Avon Technologies’ FY24 results show the continued momentum seen throughout the year, with revenue growth of 12.2% y-o-y ($275m), adjusted operating profit growth of 53.4% y-o-y ($31.6m) and a record closing order book value of $225m, up 64.3% y-o-y. Return on invested capital (ROIC) grew 500bp y-o-y to 13.7%. Given Avon’s record order pipeline, disciplined capital allocation and strong cash generation, management expects the company to achieve both its medium-term operating margin (14–16%) and ROIC (>17%) targets a year ahead of schedule in FY26.
Order intake momentum increasing
Revenue growth within Team Wendy was driven by a full-year run rate of Next Generation Integrated Head Protection System helmets and initial deliveries of the Advanced Combat Helmet Generation II helmet, with US Department of Defense (DoD) revenue up by 95.5% y-o-y. At the group level, this was offset by a 7.2% decline in revenue in Avon Protection (US DoD sales down 41% due to two years’ worth of M61 filters being delivered in 2023). Avon’s total order intake was up 40% year-on-year following strong growth, with the company signing three new ‘Programs of Record’ with the US DoD for Hood Mask Interface development programmes.
Capital allocation driving growth
Avon’s disciplined capital allocation model supports growth in its core markets, while maximising returns. Key areas of focus include a sustainable progressive dividend (targeting c 2.5–3.0x EPS cover), transformation initiatives and organic investment in R&D to deliver revenue growth and strong margin expansion. Excess cash will be deployed either through M&A or alternative shareholder returns. Net debt leverage fell from 1.9x at FY23 to 0.9x, with the company’s target leverage position at 1.0–2.0x. Adjusted basic EPS increased 80.2% y-o-y at constant currency, reflecting Avon’s strong operating profit growth and reduction in finance charges due to lower net debt during the period.
Valuation: Favourable outlook
Avon secured several new contracts and contract extensions in FY24, improving its long-term visibility out to 2030. Backed by a valuable recurring revenue base, the company is well positioned for growth in the coming years. Current projects under Avon’s transformation programme are largely expected by management to be complete by FY26, implying further upside in margin improvements. Avon’s stock price has risen c 67% ytd, reflecting its improved profitability. Management’s FY25 guidance is mid-single-digit growth in revenue, cash conversion of over 80% and adjusted operating profit and transformation investment at similar levels to FY24.
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Consensus estimates
Source: LSEG Data & Analytics. Note: *Adjusted basic EPS. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Investment Companies
VietNam Holding (VNH) delivered a 27.3% net asset value (NAV) per share total return over the last 12 months (ending 31 October) in sterling terms. The company outperformed a strongly appreciating market (Vietnam All Share Index (VNAS) at 20.6%), driven by the demand from retail investors. The economy showed robust growth, supported by a surge in exports, and investor confidence was reinforced by good H124 corporate earnings. Meanwhile, VNH executed its first share redemption tender, and investors representing only c 12.6% of total share capital decided to sell their shares at NAV. The strong performance and investors’ vote of confidence contributed to the narrowing of the discount to the current premium of 1.2%.