A £14.7m order from the Middle East - three times larger than any other so-called 'impact' order - has given gas mask maker
Clearly, the timing of orders for filter spares is an issue. Chief executive Peter Slabbert, explaining flat revenue and a 7 per cent drop in divisional operating profit to £3m, said as much. Avon shipped around 100,000 M50 gas masks in the first half, up 30 per cent, but just 220,000 filters. The ratio is normally three to one. Mr Slabbert expects the balance will be restored but can't say when. There's been no repeat of last year's higher-margin deals with Saudi Arabia, Kuwait and France, either. Thankfully, selling kit for milking cows is more predictable. Switching existing customers in North America onto its new device increased sales by 7 per cent and margins by over 140 basis points, growing profits by 16 per cent to £2.9m. Markets such as China, Brazil and India remain largely untapped, but offer huge potential. Again, though, it will take time.
Investec Securities expects adjusted pre-tax profit of £10.7m in 2012, giving adjusted EPS of 24.9p (from £10.2m and 23.3p in 2011).
|AVON RUBBER (AVON)|
|ORD PRICE:||293p||MARKET VALUE:||£90m|
|TOUCH:||290-295p||12-MONTH HIGH:||340p||Low: 230p|
|DIVIDEND YIELD:||1.1%||PE RATIO:||11|
|NET ASSET VALUE:||81p*||NET DEBT:||39%|
|Half-year to 31 Mar||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 8 Aug
Payment: 7 Sep
*Includes intangible assets of £11.1m, or 36p a share
Avon's long-term prospects look sound given the company's close relationship with the Pentagon and potential for its milking equipment. But military orders are unpredictable and a forward PE ratio of almost 12 looks about right. Hold.
Last IC view: Hold, 300p, 2 Feb 2012