- After exiting the dairy equipment market, the group is focused on producing protective masks, helmets and body armour
- Further growth should still come on the back of new contracts and the acquisition of helmet specialist Team Wendy
Avon Rubber (AVON) has been a standout player in the UK defence sector, with its shares more than doubling in value so far this year. Full-year results are due to be published on 2 December, the question is whether the group’s stellar momentum can continue.
All signs currently point to the answer being ‘yes’. Having completed the disposal of its dairy equipment business in September, Avon Rubber has exited a more cyclical market and is now solely focused on producing protective gear for defence and security customers. It has continued to sign new deals, including a $93m (£70m) sole-source contract to supply next-generation ballistic helmets to the US army.
The group has wasted little time in reinvesting the dairy sale proceeds, acquiring helmet specialist Team Wendy for $130m earlier this month. Analysts at Peel Hunt reckon the tie-up will create a “tour de force in head protection systems”. While the broker is predicting that adjusted pre-tax profit will dip by 8 per cent in the year to 30 September 2020, to £29m, it forecasts that the Team Wendy purchase will help boost profits to £48m in 2021. Buy.
Last IC View: Buy, 3,868p, 28 Aug 2020
