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Avon Rubber gets higher tech

The company's dual business proposition looks as solid as ever, judging by the forward order pipeline
May 16, 2017

The global markets in gas masks and dairy teats look as promising as ever, judging by Avon Rubber's (AVON) half-year figures. The group's export-oriented sales have been boosted by sterling depreciation, but turnover was still up 7 per cent on a like-for-like basis. Underlying operating profits were 6 per cent to the good on that measure, but up just over a fifth to £10.9m with the translation tailwind, despite margin pressure.

IC TIP: Hold at 1105p

Sales at the protection and defence division grew by 22 per cent to £55.9m, with adjusted operating profits up a fifth to £8m. Gas mask sales to the US Department of Defense (DoD) fell by 14,000 units to 93,000, but forward contracted sales of 131,000 mask systems provides strong visibility for the remainder of this year and beyond. It's worth noting that Avon's defence sales to the US military are advancing in terms of their technical requirements.

The smaller dairy division fared well, with revenues up 22 per cent to £25.2m. The outlook for this business is now more favourable, as dairy prices are rising following a prolonged period of market weakness.

Arden Partners expects adjusted profits of £24.7m for the September year-end, leading to EPS of 66.1p (from £21.6m and 74.3p in FY2016).

AVON RUBBER (AVON)
ORD PRICE:1,105pMARKET VALUE:£343m
TOUCH:1,094-1,138p12-MONTH HIGH:1,125pLOW: 805p
DIVIDEND YIELD:0.9%PE RATIO:17
NET ASSET VALUE:155p*NET CASH:£12.6m

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201666.36.121.63.16
201781.18.924.64.11
% change+22+46+14+30

Ex-div: 10 Aug

Payment: 8 Sep

*Includes intangible assets of £45.4m, or 146p a share