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An-udder strong showing from Avon

The specialist manufacturer of gas masks and dairy teats produced another strong showing in the first half, despite unfavourable currency translations
May 2, 2018

The threat of civil insurrection and the needs of dairy herds underpin the commercial proposition for Avon Rubber (AVON), a Wiltshire-based supplier of high-performance gas masks and automated milking technologies. It might seem an unusual offering, but it encompasses a high-tech, value-added and, indeed, surprisingly wide product range. More importantly, as these half-year figures demonstrate, Avon is selling its technologies into vibrant end-markets – and that’s by design, not accident. To this end, the group further streamlined its operations, by unloading US-based subsidiary, Avon Engineering Fabrications (AEF), a manufacturer of hovercraft skirts, for $9.25m (£6.8m).  

IC TIP: Hold at 1,360p

The protection division drove up its market share within the law enforcement sector (with 42 per cent revenue growth at constant currencies), which, together with demand from the US military, which meant the group order book has increased by a third since the September year-end to £40.6m. A weakened dollar constrained the top line, but it was up 5.9 per cent at constant currencies, while adjusted operating profit was 18.9 per cent to the good. The adjusted cash profit margin increased 20-basis points to 19.9 per cent, another sign of good housekeeping also reflected in the group’s ability to convert profits to cash.

WH Ireland is guiding for pre-tax profit of £26.4m in FY2018, leading to EPS of 72.4p, against £25.6m and 82.3p in 2017.

AVON RUBBER (AVON)   
ORD PRICE:1,360pMARKET VALUE:£422m
TOUCH:1,355-1,360p12-MONTH HIGH:1,390pLOW: 885p
DIVIDEND YIELD:1%PE RATIO:18
NET ASSET VALUE:200p*NET CASH:£39.1m
Half-year to 31 MarchTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017 (restated)78.98.924.74.11
201877.79.427.95.34
% change-2+6+13+30
Ex-div:9 Aug   
Payment:7 Sep   
*Includes intangible assets of £39.1m, or 126p a share