Avon Rubber (AVON) had already signalled that it would exceed expectations this year, but the scale of the earnings beat still surprised analysts. Adjusted full-year pre-tax profit soared 27 per cent to £14m, driven by a strong fourth quarter at the core protection and defence division. Earnings visibility is decent, too, and a recovery at the dairy business is under way.
Most of the growth came from sales of Avon’s gas masks and filter spares to non-military customers, such as US law enforcement agencies - up 45 per cent to £25m - and there’s already £16.4m of work for this year. With sales to the US Department of Defense (DoD) up by 6 per cent, divisional operating profit jumped by 47 per cent to £11m. Avon will supply another 40,000 masks and 80,000 pairs of filter spares during the first quarter and, with 1m US Army troops only just beginning to receive their masks, more orders look inevitable. Clearly, the dairy division struggled as Avon pushed its own brand of milking equipment, while high feed costs meant farmers spent less. Sales there fell 1 per cent and profit by 13 per cent to £5.2m, but business is picking up and surging sales in China bodes well.
Broker Arden Partners expects adjusted pre-tax profit of £14.5m in 2014, giving adjusted EPS of 36.3p (from 35.4p in 2013).
AVON RUBBER (AVON) | ||||
|---|---|---|---|---|
| ORD PRICE: | 580p | MARKET VALUE: | £178m | |
| TOUCH: | 580-584p | 12-MONTH HIGH: | 585p | LOW: 327p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 67p* | NET DEBT: | 53% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 101 | 1.86 | -0.60 | nil |
| 2010 | 118 | 7.13 | 15.2 | 1.50 |
| 2011 | 108 | 10.2 | 25.2 | 3.00 |
| 2012 | 107 | 11.0 | 26.9 | 3.60 |
| 2013 | 125 | 13.2 | 32.7 | 4.32 |
| % change | +17 | +20 | +22 | +20 |
Ex-div: 19 Feb Payment: 21 Mar *Includes intangible assets of £16.5m, or 54p per share | ||||
