Fears that Avon Rubber 's (AVON) strong progress would be undone by weak milk prices appear to have been unfounded. The maker of breathing and milking equipment delivered a 6 per cent rise in adjusted operating profit to £9m in the six months to 31 March, driven by shrewd acquisitions and robust demand for its high-margin kit. Investors responded to what management described as "workmanlike" results by sending the shares up more than 13 per cent.
While the plummeting value of milk has forced plenty of cash-strapped farmers to stretch the usage of products, this was offset by the contribution of last year's acquisition of specialist components manufacturer Interpuls. Revenue was up 18 per cent at £21m. Avon's value-added cluster exchange service, which chief Rob Rennie said helps farmers to save money, grew its reach, while its own branded products gained market share.
Elsewhere, better pricing, efficiencies and decent take-up of higher-margin respiratory kit triggered a 3 per cent jump in the protection arm's operating profit to £6.6m. And strong cash generation enabled the group to continue investing, reduce net debt by 36 per cent and increase its half-year dividend by 30 per cent for the third consecutive time.
Broker Investec forecasts adjusted pre-tax profit of £19.8m for the year to September 2016, giving EPS of 63.3p (from £19.8m and 54.6p in FY2015).
| AVON RUBBER (AVON) | ||||
|---|---|---|---|---|
| ORD PRICE: | 802p | MARKET VALUE: | £249m | |
| TOUCH: | 800-814p | 12-MONTH HIGH: | 1,180p | LOW: 706p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 154p* | NET DEBT: | 18% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 62.8 | 8.4 | 22.4 | 2.4 |
| 2016 | 66.3 | 6.1 | 21.6 | 3.2 |
| % change | +5 | -28 | -4 | +30 |
Ex-div: 7 Aug Payment: 5 Sep *Includes intangible assets of £45.5m, or 147p a share | ||||
