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Summary
- Avon Rubber Plc has reported a 30.8% surge in revenues during FY20.
- The Company has completed the acquisition of Team Wendy LLC on 02 November 2020.
- It has maintained a cash conversion ratio of 84.9% as of 30 September 2020.
- The Company has completed the divestment of milkrite InterPuls for cash consideration of £180 million.
Avon Rubber Plc (LON:AVON) is the LSE listed industrial stock. Based on 1-year performance, shares of AVON have generated a return of about 94.00%. Shares of AVON were down by close to 1.39% from the last closing price (as on 08 December 2020, before the market close at 09:00 AM GMT).
Avon Rubber Plc is the FTSE 250 listed company, which deals with personal protection system and milking point solutions. The main products of the Company are shown below -
(Source: Company presentation)
Personal Protection Equipment (PPE) Industry Overview
The PPE industry plays a vital role in shaping the economy of the nation. The emergence of Covid-19 pandemic prompts government to encourage companies to accelerate the production of PPEs to ensure the safety of people. The increasing fatality rate and hazards in the workplace are the driving factors of the industry. The industry has several product segments like head protection, eye and face protection, protective footwear, hand protection etc. Some of the key players of industry are –
- Honewell International, Inc. (U.S.)
- Avon Rubber Plc
- Blue Eagle (Taiwan)
- MSA Safety (US)
- Medacta Group SA
Financial Highlights (for FY20 ended on 30 September 2020 as on 02 December 2020)
(Source: Company result)
- The Company has reported 30.8% surge in revenue from £128.4 million for FY19 to £168.0 million during FY20 driven by 31.7% contribution from the Helmets & Armor acquisition and a 1.0% currency headwind.
- Similarly, the adjusted operating profit of the Company went up by 33.6% from £22.6 million for FY19 to £30.2 million during FY20 driven by benefits of strong organic trading performance and the Helmets & Armor acquisition.
- The reported basic earning per share of 447.4 pence is reflecting the profit arising from the divestment of milkrite Interpuls.
- With regards to its financial position, the Company has strengthened its balance sheet by having net cash balance of £93.2 million as of 30 September 2020 following the closing of the Helmets & Armor acquisition and divestment of milkrite Interpuls.
- The Company has maintained a cash conversion ratio of 84.9% as of 30 September 2020.
- The final dividend grew by 30% from 20.83 pence for FY19 to 27.08 pence during FY20 on account of strong trading performance.
- The Company has demonstrated a strong increase of 117.4% in its closing order book from £36.7 million for FY19 to £79.8 million during FY20
Segmental Analysis
(Source: Company result)
Military - The Company has reported a 3.6% decline in Military revenue to £82.8 million during FY20 due to strong comparator in 2019. The order intake grew by 5.5% on a constant currency basis to £88.5 million, contributing to a strong closing order book of £36.8 million for FY20.
Helmets & Armor - The Company has reported revenue of £40.8 million during FY20 with the contribution of £38.4 million from Military customers and £2.4 million from First Responder. Helmets & Armor delivered an EBITDA margin of 17.9% reflecting the initial cost synergy delivery.
First Responder - The Company has reported a surge of 7.8% in First Responder revenue to £44.4 million during FY20 due to increased demand related to COVID-19 having more than offset the prior year Fire SCBA revenues.
Recent News
On 20 November 2020, the Company has updated that current Chair David Evans will retire from the Board on 2 December 2020 and will be replaced as Chair by Bruce Thompson.
On 03 November 2020, the Company has updated that it has completed the acquisition of Team Wendy LLC on 02 November 2020. The Company has already completed the acquisition of 3M's ballistic protection business and the Ceradyne brand earlier this year. Moreover, this transaction of US$130 million (approximately £100 million) on a cash-free and debt-free basis has created an entity which is the global market leader in head protection systems for the military and first responder market.
Team Wendy is a leading U.S. supplier of unique head protection systems for military, law enforcement, search and rescue, and adventure markets. Team Wendy has generated revenue of $44.6 million and EBITDA of $13.9 million for FY20 ended on 30 September 2020.
On 25 September 2020, the Company has updated that completion of the divestment of milkrite Interpuls is done on the same day. On 2 July 2020, the Company announced that it had signed an agreement to sell milkrite InterPuls to DeLaval Holding BV for a cash consideration of £180 million on a cash and debt-free basis.
On 24 September 2020, the Company has updated that it has received a contract of $93 million to render the Next-Generation Integrated Head Protection System for U.S. Army.
Share Price Performance Analysis of Avon Rubber Plc
(Source: EODHD/Others, chart created by Kalkine group)
Shares of Avon Rubber Plc were trading at GBX 3,905.00 and were down by close to 1.39% against the previous closing price as on 08 December 2020, (before the market close at 09:00 AM GMT). AVON’s 52-week High and Low were GBX 4,650.00 and GBX 1,788.10, respectively. Avon Rubber Plc had a market capitalization of around £1.23 billion.
Business Outlook
The product portfolio of the Company is enriched with various multi-year military contracts which are enhancing the prospects at medium-term levels. The Company is having a strong opening order book of £79.8 million for FY21, which will enable the Company to deliver robust organic financial growth in FY21.
The Helmets & Armor business segment will give a benefit of full-year contribution in FY21 versus the nine months contribution during FY 20. The Company is expecting revenues from helmet and armor products to remain at the current level in the first half of the year, with growth in the second half. Regarding the acquisition of Team Wendy, FY21 will get advantage from 11 months of contribution. The Company is expecting Team Wendy revenue in line with the investor proposition of 3% per annum in FY21.
