Last close As at 05/08/2026
GBP18.88
▲ 108.00 (6.07%)
Market capitalisation
GBP572m
Research: Industrials
Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product replacements, should bolster its medium-term target for ROIC to exceed 17%, which would surpass the average of UK defence peers.
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Avon Protection |
Unmasking its growth potential
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Aerospace and defence |
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12 February 2024 |
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Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product replacements, should bolster its medium-term target for ROIC to exceed 17%, which would surpass the average of UK defence peers.
Cash flow visibility with product replenishment
Avon is strategically well-positioned now its armour business has been discontinued, leaving it to a focus on organic growth within its core respiratory and head protection divisions (medium-term revenue target of greater than 5% CAGR). Contract extensions with the DoD (forecast to 2030), alongside the inevitable need for product replenishment, provide some degree of long-term cash flow visibility. Head protection suffered a loss in FY23, although this should recover in the short term with the roll-out of next-generation ballistic helmets including the NG IHPS to the US Army and ACH GEN II to the US Defense Logistics Agency (combined orderbook of $120m). Respiratory protection has the potential to recover through the launch of the MiTR mask and goggle system, tailored to address evolving threats (tear gas, Fentanyl), with an accessible market of c $200m.
Accelerating demand for military protection
Global geopolitical tensions have sparked higher defence spending by the US DoD and NATO countries. The need for military protection is critical, with ballistic military helmet and respirator demand expected by Avon to experience a CAGR of c 4% from 2024–28, representing a significant boost to Avon’s growth prospects. This is reflected in its order backlog of over $180m (a decade high), partially attributable to a rise in head protection orders with c $60m of orders for NG IHPS and over $20m for ACH GEN II. Delivery ramp-ups combined with inventory turnover improvement and anticipated $10m annualised cost savings from the Irvine site closure should help boost operating margins to the targeted c 15% level.
Valuation: Growth prospects not reflected in rating
Avon’s share price over the last year has markedly lagged the broader UK defence sector, declining 6.3% (average: +23.8%), despite the growth prospects of the group having increased significantly. Nevertheless, there is uncertainty as to when Avon’s transformation programme will lead to meaningful margin improvement. It trades at a 2025e P/E of 16.6x compared to the peer average of 14.2x.
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Consensus estimates
Source: Refinitiv |
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
GCP Infrastructure Investments (GCP) has a mature, diverse and operational portfolio of 51 UK infrastructure assets with a total asset value of £1.1bn and a net asset value (NAV) of £953m, two-thirds of which is focused on renewables, and 41% of investments by value have some form of inflation protection. The portfolio is also well-positioned to benefit from the global trends of decarbonisation, energy security and population dynamics. The fund’s January capital markets day saw the board and management reconfirm the capital reallocation policy for the coming year, which consists of asset disposals and refinancing to position the fund in the strongest possible position.