Arguably, a strong dollar has been the most significant story in financial markets in 2018. For Avon Rubber (AVON), which reports in sterling but whose US customers account for over 70 per cent of group sales, one might have expected a currency tailwind in its full-year results. But timing is everything, and a stronger pound in the year to September held back adjusted operating profit, which rose 4.6 per cent to £27.3m. All things being equal, the increase would have been 11.8 per cent.
Regardless, this was another decent outing for the respiratory protection and milking equipment specialist. In protection, Avon continues to make inroads with clients in law enforcement and the military, as strong sales from the M50 gas mask helped to boost the top line and pushed up the closing order book a third to £35.3m. And in the dairy business, where orders and investment plans appear to be stalling, margins nonetheless held up and 2017’s £8m contribution to adjusted operating profits was matched.
Robust inventory management and invoicing also meant cash conversion came in at 108 per cent at the group level. Together with disposal proceeds, net cash has now jumped 88 per cent in a year, which combined with $40m (£31m) of undrawn banking facilities raises the prospect for "meaningful" M&A in the year ahead, said chief executive Paul McDonald.
Peel Hunt expects adjusted pre-tax profit of £29.3m and EPS of 77.5p for the year to September 2019, up from £27.2m and 76.6p in FY2018.
| AVON RUBBER (AVON) | ||||
| ORD PRICE: | 1,365p | MARKET VALUE: | £423m | |
| TOUCH: | 1,360-1,375p | 12-MONTH HIGH: | 1,485p | LOW: 1,055p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 273p* | NET CASH: | £46.5m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 125 | 13.9 | 36.2 | 5.6 |
| 2015 | 134 | 17.8 | 50.4 | 7.3 |
| 2016 | 143 | 15.9 | 58.1 | 9.5 |
| 2017 | 159 | 18.9 | 70.6 | 12.3 |
| 2018 | 166 | 21.6 | 70.1 | 16.0 |
| % change | +4 | +14 | -1 | +30 |
| Ex-div: | 14 Feb | |||
| Payment: | 15 Mar | |||
| *Includes intangible assets of £41.5m, or 134p a share | ||||
