Avon Rubber growth driven by 3M helmets and armour acquisition
By Josh White
Date: Wednesday 02 Dec 2020
(Sharecast News) - Avon Rubber reported a 30.8% improvement in revenue in its final results on Wednesday, to £168m, which it said comprised 0.1% organic constant currency growth, with a 31.7% contribution from the acquisition of 3M helmets and armour, and a 1.0% currency headwind.
The FTSE 250 company said its adjusted operating profit was up 33.6% to £30.2m, reflecting the benefits of strong organic trading performance and the helmets and armour acquisition, while adjusted basic earnings per share were 13.8% firmer at 76.5p.
Its adjusted EBITDA margin came in at 22.9% for the year ended 30 September, up 140 basis points on an organic constant currency basis, with a "strong uplift" reported in respiratory protection, driven by an improved product mix.
Organic constant currency adjusted operating profit growth came in at 8.9%.
Reported operating profit fell to £5.9m from £9.9m, which included £6.5m of amortisation of acquired intangibles, and £17.8m of exceptional costs related to the acquisition of helmets and armour, and Team Wendy.
Avon said its reported basic earnings per share leapt to 447.4p from 46.2p year-on-year, which it put down to the results of 'milkrite InterPuls' and the gain arising from that divestment.
Cash conversion was 84.9%, with organic cash conversion excluding helmets and armour of 123.3%.
Net cash stood at £93.2m at the end of the year, rising from £35.4m a year earlier, following completion of the helmets and armour acquisition and the divestment of milkrite InterPuls, including offsetting lease liabilities of £22.8m.
A new $200m medium-term bank facility would provide financing flexibility and capacity for further strategic investment, Avon Rubber explained.
Its board declared a final dividend per share of 18.06p, up 30%, resulting in a full-year total dividend of 27.08p, also up 30%.
Avon Rubber said it had continued to operate with minor disruption through the year, despite the "unprecedented challenge" of Covid-19, adding that its organic revenue growth reflected strong first responder performance, with law enforcement growth "more than offsetting" its exit from the fire self-contained breathing apparatus market.
Medium-term contracts worth up to $177m had been secured to supply the US Department of Defense (DoD) with the M50 mask system, M61 filters, spare parts and accessories, while a 10-year NATO Support & Procurement Agency contract had been strick to supply FM50 mask systems, powered and supplied air systems, filters, spare parts and accessories.
A $93m integrated head protection system (IHPS) ballistic helmet sole source contract, a 'Vital Torso Protection X-Side Ballistic Insert' (VTP XSBI) body armor four-year $265m dual source contract, and a three-year legacy enhanced small arms protective inserts (ESAPI) body armour sole source contract with a value of up to $333m had also been secured with the US DoD.
Looking ahead, Avon Rubber said its medium-term outlook was underpinned by multi-year military contracts across its portfolio, adding that its "strong" opening order book of $101.7m (£79.8m) provided "excellent" visibility and confidence for 2021.
It reported a "strong" pipeline of rest-of-world opportunities, with first orders and deliveries expected under the new 10-year NATO contract, and said momentum in first responder activity was expected to continue into 2021.
The acquisition of Team Wendy, completed on 2 November, was expected to further accelerate growth.
Its board said its net cash position and balance sheet provided it with capacity to deliver its growth strategy, and make further value-enhancing acquisitions over the medium-term.
Avon said it was mindful of continued risks presented by the Covid-19 pandemic, but said that its operational response in 2020 provided it with confidence that any challenges could be navigated.
"2020 has been a year of both significant strategic evolution and strong organic execution for Avon Rubber," said chief executive officer Paul McDonald.
"We have again delivered strong results ahead of expectations and continued to make significant steps transforming the business into a leading provider of life critical personal protection products.
"We have consistently delivered on our strategy to invest in expanding our product portfolio to meet more of the protection needs of our customers."
That, McDonald said, had enabled the company to build a "broader and more visible" long-term contract portfolio, to position the business to deliver further growth in 2021 and beyond.
At 0823 GMT, shares in Avon Rubber were down 6.81% at 4,310.10p.
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